Durham University
Programme and Module Handbook

Postgraduate Programme and Module Handbook 2012-2013 (archived)

Module BUSI50115: Derivatives and Financial Risk Management

Department: Business School (Business)

BUSI50115: Derivatives and Financial Risk Management

Type Open Level 4 Credits 15 Availability Available in 2012/13 Module Cap
Tied to


  • This module is a pre-requisite for : Managing People, Managing Finance, Managing Systems, Managing in the Competitive Environment, Managing in the Global Environment.


  • Compulsory.

Excluded Combination of Modules

  • None.


  • To develop students' knowledge and understanding of derivative markets and financial risk management;
  • provide students with the opportunity to become familiar with recent research and applied issues in derivative markets and risk management;
  • offer students the opportunity to develop some key skills.


  • The Role and Growth of Derivative Markets
  • The Basics of Derivative Pricing: Tracking portfolios and arbitrage; The valuation of forward contracts; Binomial pricing models.
  • Main Derivative Instruments, their Markets, Characteristics and Pricing: Forward contracts; Swaps; Financial futures; Options.
  • Risk Management and Corporate Strategy: The decision to hedge and its motivations; Hedging and managerial incentives; Factors affecting interest rate risk exposure; Factors affecting foreign exchange risk exposure.
  • The Practice of Hedging: Measuring a firm's exposure to financial price risk; Hedging short-term commitments; Hedging and convenience yields; Hedging long-dated commitments.
  • Hedging with Swaps
  • Hedging with financial Futures: the Optimal Hedge Ratio
  • Hedging with Options: Volatility and the 'Greeks'
  • Value at Risk: Measuring the Firm's total Price Risk

Learning Outcomes

Subject-specific Knowledge:
    Subject-specific Skills:
    • By the end of the module, students should:
    • have knowledge and understanding of essential issues in derivative markets and risk management
    • be able to use recent procedures to evaluate financial derivatives, and develop and understanding of how to measure and manage financial risks
    • have practised problem solving and analytical skills
    • have had the opportunity to become familiar with recent research and its application in derivative markets.
    Key Skills:
    • In addition, students should also have developed further the following key skills:
    • Written Communication - e.g. by writing formative and summative assignments.
    • Interpersonal Communication - e.g. by actively participating in lectures and seminars; by preparing and giving group presentations; by writing a group report for the case study.
    • Oral Communication - e.g. by presenting in seminars.
    • Teamwork - e.g. by preparing presentations in groups; by working in groups for the case study and preparing a group report.
    • Planning, Organising and Time Management - e.g. by preparing work for seminars; downloading handouts before relevant lectures; observing strict deadlines for formative and summative work.
    • Problem solving and analysis - e.g. by using a logical and analytical approach to answer question in preparation for seminars and case study.
    • Initiative - e.g. by organising teamwork and group presentations; searching relevant literature and information in preparation of formative and summative work.
    • Numeracy - e.g. by being exposed to empirical applications in international money and banking; applying core mathematical and statistical skills to analyse a range of tutorial questions.
    • Computer Literacy - e.g. by word-processing formative assignments; accessing and downloading from DUO teaching material; using e-mail to communicate with tutors and other students; using library on-line facilities and the web to search for literature.

    Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

    • FT/PT.Exec. through a series of lectures, case studies, guided reading.
    • DL The module is taught through a combination of learning materials (consisting of specially written course material and selected text books), self-assessed exercises and a formative assignment on key topics and issues, together with guided reading. This is designed to:
    • Present the core curriculum in a set of discrete units suitable for study by students at a distance, in conjunction with personal and professional commitments, to a self-regulated study plan.
    • Permit students to develop their understanding of the core curriculum by self reflection and if necessary in consultation with an allocated tutor.
    • Encourage independent learning.
    • Student learning will occur by:
    • Independent study using distance learning material, texts as supplied.
    • Working independently in the solution of examples and in the preparation for self-assessed and formative assignments.
    • The assessment of the module, by the written examination, is designed to:
    • Test the acquisition and articulation of knowledge.
    • Test conceptual understanding and skills of application and interpretation within the business context.

    Teaching Methods and Learning Hours

    Activity Number Frequency Duration Total/Hours
    Lectures 8 as required 3 hours 24
    Group, case study work
    Preparation & Reading 126
    Other: (Mentor visits)
    Total 150

    Summative Assessment

    Component: Assignment Component Weighting: 100%
    Element Length / duration Element Weighting Resit Opportunity
    Written assignment 4,000 words maximum 100%

    Formative Assessment:

    Attendance at all activities marked with this symbol will be monitored. Students who fail to attend these activities, or to complete the summative or formative assessment specified above, will be subject to the procedures defined in the University's General Regulation V, and may be required to leave the University