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THIRD SEMESTER

MFC-3.1 FINANCIAL DERIVATIVES AND RISK MANAGEMENT

Objective
This course with familiarize the students in the application of various tools and techniques of
financial risk management

Course Input
UNIT- I Risk: Definition, Types of Risk, Process of Risk Management, The Tools of risk
management

Derivatives: Definition and Evolution of Derivatives, Derivatives Markets, Types


of Derivatives, derivatives markets in India

UNIT-II Future Market: Functions of Futures market, Speculation and Hedging, Price,
Spread and Headging, Futures and Price Stabilization, Tests of Efficiency, Financial
futures as a mechanism of risks transference, Spot and Futures Prices.

UNIT-III Financial Futures: Interest Rate futures, Currency Futures (Foreign Exchange)
Stock index futures and Financial Futures in India. Risk Management with Futures,
Cost of Carry Model, Index Arbitrage, Purchasing Power parity Theorem.

UNIT-IV Option: Terminology and Methodology of Trading, Types of Options, Option


Pricing, Swaps, Types of Swaps, Swap Valuation and other Derivatives, Speculation
with Options, Risk Management with Options & Futures.

UNIT-V Regulatory Framework of Futures & Derivatives: Regulatory Bodies in major


International Markets, Regulatory Framework in India, Regulatory Instruments and
needs. Accounting for Derivative Transactions.