Risk Management Using Derivatives - Online

It is essential for financial managers to identify risks accurately

and to use the right control techniques. This course begins by
introducing the different types of risk, and explains how to use
the risk cycle to recognize these risks and control them. The
course then moves on to the different types of derivative
techniques that can be used to manage risk, including FX risk,
short- and long-dated domestic interest rate risk, long-dated
foreign interest rate risk and equity risk. In the final lesson,
participants are presented with several case studies that apply
what they've learned about using derivatives to manage risk.

Please note that this is a curriculum of individual course modules.

You will need to pass each module exam in order to qualify for a
certificate of completion.

Students will be able to:

 Identify the different categories of risk.

 Recognize how risks arise.
 Recognize the elements of the risk cycle
 Identify the different types of risk (translation,
transaction, contingent, and external risks)
 Explain the Quantification, Policy,
Implementation and Monitoring steps of the Risk Cycle
 Describe the benefits of internal hedging
 Recognize applications for forward foreign
exchange contracts to manage FX risk
 Identify the use of non-deliverable forward
foreign exchange contracts in the management of FX risk
 Recognize the use of currency options in the
management of FX risk
 Identify the use of forward interest rate
agreements (FRA's) to manage risk.
 Recognize exchange traded futures as they are
used to manage risk.
 Recognize management of risk using interest
rate options.
  Discuss the use of interest rate swaps in
managing long-dated domestic interest rate risk.
 Recognize the use of swaptions in managing
long-dated domestic interest rate risk.
 Recognize long-dated foreign interest rate risk
exposure.
 Identify how to use a currency swap to manage
long-dated foreign interest rate risk.
 Define equity risk and beta.
 Explain the role of stock index futures in
managing equity risk.
 Apply derivative techniques to manage
translation risk.
 Identify elements of transaction risk and how
best to manage it using derivatives.
 Recognize strategies for managing contingent
risk using derivatives.

DERIVATIVE In finance, a derivative is a financial instrument whose

value depends on other, more basic, underlying variables[1]. Such variables
can be the price of another financial instrument (theunderlying asset[2]),
interest rates, volatilities, indices, etc. There are many kinds of derivatives,
with the most common being swaps, futures, and options. Derivatives are a
form ofalternative investment.

A derivative is not a stand-alone asset, since it has no value of its own.

However, more common types of derivatives have been traded
on markets before their expiration date as if they were assets. Among
the oldest of these are rice futures, which have been traded on the Dojima
Rice Exchange since the eighteenth century.[3]

Derivatives are usually broadly categorized by:

 the relationship between the underlying asset and the derivative

(e.g., forward, option, swap);
 the type of underlying asset (e.g., equity derivatives, foreign exchange
derivatives, interest rate derivatives, commodity derivatives or credit
derivatives);
 the market in which they trade (e.g., exchange-traded or over-the-counter);
and
 their pay-off profile.
FUTURES:
In finance, a futures contract is a standardized contract between two parties to
buy or sell a specified asset (e.g. oranges, oil, gold) of standardized quantity and
quality at a specified future date at a price agreed today (the futures price or
the strike price). The contracts are traded on a futures exchange. Futures
contracts are not "direct" securities like stocks, bonds, rights or warrants. They
are still securities, however, though they are a type of derivative contract. The
party agreeing to buy the underlying asset in the future assumes a long position,
and the party agreeing to sell the asset in the future assumes a short position.
The price is determined by the instantaneous equilibrium between the forces of
supply and demand among competing buy and sell orders on the exchange at
the time of the purchase or sale of the contract.
FORWARDS
In finance, a forward contract or simply a forward is a non-standardized
contract between two parties to buy or sell an asset at a specified future time at a
price agreed today.[1] This is in contrast to a spot contract, which is an agreement
to buy or sell an asset today. It costs nothing to enter a forward contract. The
party agreeing to buy the underlying asset in the future assumes a long position,
and the party agreeing to sell the asset in the future assumes a short position.
The price agreed upon is called the delivery price, which is equal to theforward
price at the time the contract is entered into.
The price of the underlying instrument, in whatever form, is paid before control of
the instrument changes. This is one of the many forms of buy/sell orders where
the time of trade is not the time where the securities themselves are exchanged.
SWAPS:

In finance, a swap is a derivative in which counterparties exchange certain

benefits of one party's financial instrument for those of the other party's financial
instrument. The benefits in question depend on the type of financial instruments
involved. For example, in the case of a swap involving two bonds, the benefits in
question can be the periodic interest (or coupon) payments associated with the
bonds. Specifically, the two counterparties agree to exchange one stream
of cash flows against another stream. These streams are called the legs of the
swap. The swap agreement defines the dates when the cash flows are to be paid
and the way they are calculated.[1] Usually at the time when the contract is
initiated at least one of these series of cash flows is determined by a random or
uncertain variable such as an interest rate, foreign exchange rate, equity price or
commodity price.[1]
HEDGING

In finance, a hedge is a position established in one market in an attempt to

offset exposure to price changes or fluctuations in some opposite position
with the goal of minimizing one's exposure to unwanted risk. There are
many specific financial vehicles to accomplish this including insurance
policies, forward contracts, swaps, options, many types of over-the-
counter and derivative products, and perhaps most popularly, futures
contracts. Public futures markets were established in the 19th century to
allow transparent, standardized, and efficient hedging of
agricultural commodity prices; they have since expanded to include futures
contracts for hedging the values of energy, precious metals, foreign
currency, andinterest rate fluctuations.

SPECULATION
In finance, speculation is a financial action that does not promise safety of the
initial investment along with the return on the principal sum.[1] Speculation
typically involves the lending of money or the purchase
of assets, equity or debt but in a manner that has not been given thorough
analysis or is deemed to have low margin of safety or a significant risk of the loss
of the principal investment. The term, "speculation," which is formally defined as
above in Graham and Dodd's 1934 text, Security Analysis, contrasts with the
term "investment," which is a financial operation that, upon thorough analysis,
promises safety of principal and a satisfactory return.[1]
 04 - ---------- Interview call letter for the requirement
of Financial Analyst ----------------------
Boxbe Waiting List X

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from Kelly Services India Pvt Ltd <Deepa_L@kellyservices.co.in>

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8 (3 days ago)
tokommu.sunil@gmail.com

dateFri, Apr 8, 2011 at 11:52 PM

subject04 - ---------- Interview call letter for the requirement of Financial Analyst ----------
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Your CV is been short listed; walk in Monday april 11th to Friday april
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Excellent written and Verbal Communication Skills in English Language. 

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