Introduction to Financial Derivatives and Risk Management
Objectivos
Risk Management curricular unit pursues two main goals. The first goal is to make students aware of the main risks in an organization focusing in particular on market risk (equity and commodity prices, interest rates, and foreign exchange rates), liquidity and operational risks. The second goal is to introduce students to the variety of financial derivatives (futures, forward, swaps and options) and teach them how these instruments can be useful in managing cash-flows mainly for hedging purposes.
Caracterização geral
Código
33165
Créditos
6
Professor responsável
Luís Pinheiro (IMS)
Horas
Semanais - 3
Totais - A disponibilizar brevemente
Idioma de ensino
Inglês
Pré-requisitos
A disponibilizar brevemente
Bibliografia
Jorion, Philippe (2009). Financial Risk Manager HandBook. 5th Edition. New York: Wiley Finance Bodie, Z., A. Kane and A. Marcus (1999). Investments. 4th Edition. New York: Irwin McGraw-Hill.
Fabozzi, Frank (2005). The Handbook of Fixed Income Securities. 7th Edition. New York: McGraw-Hill.
Smithson, Charles (1998).Managing Financial Risk: A Guide to Derivative Products, Financial Engineering, and Value Maximization. 3rd Edition. New York: McGraw-Hill.
Hull, John (2000).Options, Futures and Other Derivatives. 4th Edition. New York: Prentice Hall.
Método de ensino
Theory and practice will be part of the course. Some practical examples are taught in class and others will be provided through homeworks. The final grade of the course will take into account all the homeworks (40%) and final exam (60%). In order to get approved in the course students need a minimum grade of 7 points in the exam and a final weighted average equal or higher than 10 points. Students are encouraged to participate during classes and to read documentation listed in the bibliography of the course. The slides used in the classes are just a summary and should be seen as guideline for more depth reading of the subjects lectured in the course.
Método de avaliação
Theory and practice will be part of the course. Some practical examples are taught in class and others will be provided through homeworks. The final grade of the course will take into account all the homeworks (40%) and final exam (60%). In order to get approved in the course students need a minimum grade of 7 points in the exam and a final weighted average equal or higher than 10 points. Students are encouraged to participate during classes and to read documentation listed in the bibliography of the course. The slides used in the classes are just a summary and should be seen as guideline for more depth reading of the subjects lectured in the course.
Conteúdo
1. Importance of risk management
1.1. Types of risks in organizations
1.2. The role of financial hedging
2. Liquidity risk
3. Introduction to Asset and liability Management (ALM)
4. Introduction to financial derivatives (linear): futures and forwards
4.1. Difference between futures and forwards
4.2. Non-arbitrage principle and the cost of carry
4.3. Payoff charts
5. Other financial derivatives: swaps (IRS, CDS and ES)
6. Introduction to non-linear Derivatives (non-linear):
6.1. Definition of call and put
6.2. Fundamental concepts for options valuation
6.3. Payoff and P/L charts
7. Introduction to measures of risk quantification
7.1. VaR, Stress Testing and Backtesting
8. Operational risk