Derivatives and Risk Management
Overview
This unit develops advanced capabilities in identifying, modelling, and managing financial risk using derivative instruments across complex market contexts. Students enhance quantitative and analytical skills through the critical application of pricing and risk management models, with attention to their assumptions, limitations, and real-world implications. The unit emphasises the importance of sustainability and ESG Criteria in managing financial risk, by fostering ethical and responsible decision-making in the pursuit of risk-adjusted returns. Through applied use of financial technologies and trading simulations, students develop professional judgement in designing derivative strategies that support resilient and sustainable portfolio outcomes.
Requisites
31-May-2026
01-November-2026
Unit learning outcomes
Students who successfully complete this unit will be able to:
- Critically analyse the sources of financial risk, the importance of implementing effective hedging strategies and evaluating the outcome of these strategies, in multiple contexts.
- Apply a coherent understanding of different types of derivatives and the principles that underlie pricing models.
- Analyse the importance of ethical, sustainability, and ESG-informed decision-making in the identification and management of financial risk.
- Utilise financial technology to apply trading strategies that reflect real-world understanding of the workings of derivatives.
- Apply research principles and techniques to plan and execute a group project
Teaching methods
Hawthorn
| Type | Hours per week | Number of weeks | Total (number of hours) |
|---|---|---|---|
| On-campus Class |
2.00 | 12 weeks | 24 |
| Online Lecture (asynchronous) |
1.00 | 12 weeks | 12 |
| Unspecified Activities Independent Learning |
9.50 | 12 weeks | 114 |
| TOTAL | 150 |
Assessment
| Type | Task | Weighting | ULO's |
|---|---|---|---|
| Assessment | Individual | 30 - 50% | 1,2,3 |
| Online Quizzes | Individual | 10 - 20% | 1,2,3 |
| Research Project | Group | 40 - 50% | 1,2,3,4,5 |
Content
- Foundations of financial risk management in global markets
- Futures, forwards, and options: hedging and trading strategies across a variety of financial markets
- Interest rate and currency swaps for risk transfer – valuation and hedging strategies.
- Credit derivatives and structured credit products: valuation and hedging/trading strategies.
- Black–Scholes–Merton and binomial option pricing models
- Measurement and management of market risk using Value at Risk (VaR) and Conditional VaR (CvaR)
- Application of derivatives in portfolio management and risk-adjusted performance
- Ethical, sustainability, and ESG considerations in derivatives-based risk management.
Study resources
Reading materials
A list of reading materials and/or required textbooks will be available in the Unit Outline on Canvas.