Course

Unit 1

Introduction to risk management – Meaning and need – significance -Types of risk – Types of risk management instruments -Forwards – Futures – Options – Swaps.

Unit 2

Financial derivatives – Meaning – Need- Evolution of financial derivatives markets in India – Derivative markets – Exchange – Participants – Functions – The regulatory framework of

derivative trading in India – forward contracts – future contracts – Difference between forwards and futures – financial future – Future trading – currency futures- Interest rate futures- Pricing and valuation of future contracts- Value at risk -Hedging risk –Hedging with stock index future.

Unit 3

Options – meaning – need and significance– options and futures – fundamental option strategies – types of option – put –call – trading strategies of risk instruments – positions in options.

Unit 4

Pricing of options- intrinsic value and time value – pricing at the expiry of contract – factors affecting option pricing-put-call-parity pricing-models of pricing – binomial option – pricing models – Black Scholes pricing methods.

Unit 5

Swap- meaning and definition – development – structure of swap dealing for risk management – interest rateswap – forward swap and swap option contracts- cancellable and extendable swaps-no generic swaps transactions, Currency swaps – Valuation and pricing of swaps.

Course Objective: To equip the students with an in-depth knowledge of derivatives and risk management, by giving them the knowledge of basics in options, Forwards, futures, and swaps.

Course Outcomes: 

The students will be able to: 

CO1: Understand the key terminology and definitions related to financial derivatives and risk management strategies.

CO2: Identify the pricing models of future contracts.

CO3: understand the role of options in hedging against market risk.

CO4: Assessment of option market.

CO5: Assess the effectiveness of risk management functions of swap transactions.

TEXTBOOKS:

• S L Gupta – Financial Derivatives: Theory, Concepts and Problems, PHI Publishers

• Rajeev Srivastava, Derivatives and Risk Management, Oxford University Press, New

REFERENCE BOOKS:

• S. S. Kumar – Financial Derivatives, PHI Publishers

• Parasuraman N – Fundamentals of Financial Derivatives, Wiley India

• Bishnupriya Mishra – Financial Derivatives, Excel Books Evaluation Pattern – R.13 & R.16
• Bansal – Derivatives and Financial Innovations, TMH