Academic Year 2022/2023 Semester 2

Course Coordinator Pengyu Wei

Course Code BR2210
Course Title Financial Risk Management
Pre-requisites Nil
No of AUs 3
Contact Hours 39
Note: This course is mutually exclusive with BF2209 (4AU Derivative Securities), BF2221 (3AU Derivative Securities
and Hedging Strategies), BF3202 (4AU Fixed Income Securities), and BF3216 (3AU Fixed Income Securities).

A) Course Aims
This course provides in-depth background knowledge of financial products and the markets in which they trade. It
covers the analysis of derivative instruments such as options, forward contracts, futures contracts, and swaps. The
course discusses how these contracts work, how they are used, and how they are priced. The course aims at
equipping students with necessary knowledge and skills to prepare for Financial Markets and Products in GARP
FRM Exam Part I.

B) Intended Learning Outcomes (ILO)/Objectives

By the end of this course, you should be able to:
1. Describe the mechanics of forwards and futures
2. Describe hedging strategies involving forwards and futures
3. Calculate forwards and future prices
4. Describe the mechanics of swaps
5. Describe the mechanics of options
6. Describe trading strategies involving options and calculate their payoffs
7. Analyse properties of option prices
8. Calculate option prices using binomial trees and the Black-Scholes-Merton model
9. Apply Greeks to hedging and risk management
10. Describe the mechanics of credit derivatives

C) Course Content

• Forwards and futures markets

• Trading strategies involving forwards and futures
• Interest rates
• Pricing forwards and futures
• Swaps
• Options markets
• Trading strategies involving options
• Properties of options
• Option pricing
• Credit derivatives

D) Assessment (includes both continuous and summative assessment)

Component ILO NBS Learning Weighti Team/Individual Assessment Rubrics

Tested Goal (Refer to ng
Annex D for list) (Please insert rubrics as
Appendix)
 1. Final ILO1- Critical thinking & 50% Individual NA
Examination 10 Acquisition of
knowledge
2. Midterm ILO1-5 Critical thinking & 30% Individual NA
Examination Acquisition of
knowledge
3. Class ILO1- Oral 10% Individual See Annex B
participation 10 Communication &
Critical Thinking
4. Class ILO5-9 Oral 10% Individual See Annex C
presentation* Communication &
Critical Thinking
Total 100%

Important Notes:
* 1. Students will complete a project that uses real-world datasets to illustrate certain trading strategies (details
TBA) and present the results to the class.

You will receive verbal feedback from me about your presentations. You will receive summative feedback on the
exams following the conclusion of the module.

F) Learning and Teaching approach

Approach How does this approach support you in achieving the learning outcomes?

Lectures The interactive lecture session explains key concepts in detail, supported with illustrating
examples. The lectures provide ample opportunities for open discussion on the conceptual
questions raised in the class, which allow you to think critically and share your ideas with
the class. The interaction between the instructor and the entire class ensures that the
targeted learning outcomes can be achieved.

In-Class activities Interactions are encouraged in class to enhance critical thinking and class engagement.
Instant feedback will be provided to in-class participation to ensure the learning goals can
be attained.

G) Reading and References

Basic Text
John C. Hull. Fundamentals of Futures and Options Markets, Global Edition, 8th Edition, 2017.

H) Course Policies and Student Responsibilities

(1) General

You are expected to complete all assigned pre-class readings and activities, attend all seminar classes punctually
and take all scheduled assignments and tests by due dates. You are expected to take responsibility to follow up
with course notes, assignments and course related announcements for seminar sessions they have missed. You
are expected to participate in all seminar discussions and activities.

(2) Absenteeism

Absence from class without a valid reason will affect your overall course grade. Valid reasons include falling sick
supported by a medical certificate and participation in NTU’s approved activities supported by an excuse letter
from the relevant bodies.

If you miss a lecture, you must inform the course instructor via email prior to the start of the class.

I) Academic Integrity

Good academic work depends on honesty and ethical behaviour. The quality of your work as a student relies on
adhering to the principles of academic integrity and to the NTU Honour Code, a set of values shared by the whole
university community. Truth, Trust and Justice are at the core of NTU’s shared values.

As a student, it is important that you recognize your responsibilities in understanding and applying the principles of
academic integrity in all the work you do at NTU. Not knowing what is involved in maintaining academic integrity
does not excuse academic dishonesty. You need to actively equip yourself with strategies to avoid all forms of
academic dishonesty, including plagiarism, academic fraud, collusion and cheating. If you are uncertain of the
definitions of any of these terms, you should go to the academic integrity website for more information. Consult
your instructor(s) if you need any clarification about the requirements of academic integrity in the course.

J) Course Instructors

Instructor Office Location Phone Email Consultation Hours

Pengyu Wei S3 B1A-03 6790 [email protected] By appointment via email
5728 u.sg

K) Planned Weekly Schedule

Week Topic ILO Readings/ Activities

1 Introduction to 1,4 Chapter 1
Financial Markets and
Derivatives
2 Mechanics of Futures 1,2 Chapters 2 and 3
Markets

Hedging Strategies
Using Futures
3 CNY
4 Interest Rates 3 Chapters 4 and 5

Determination of
Forward and Futures
Prices
5 Interest Rate Futures 1-3 Chapter 6

6 Swaps 4 Chapter 7
7 Midterm 1-5
Recess
8 Securitization and the 5 Chapters 8 and 9
Credit Crisis of 2007

Mechanics of Options
Markets
9 Properties of Stock 6,7 Chapters 10 and 11
Options

Trading Strategies
Involving Options
10 Option Pricing: 8 Chapter 12 and 13
Binomial Tree Models

Option Pricing: The

Black-Scholes-Merton
Model
11 Option Greeks and 9,10 Chapter 17 and 23
Hedging

Credit Derivatives
12-13 Presentation
 ANNEX B: ASSESSMENT CRITERIA FOR CLASS PARTICIPATION

Performance
Traits
1-2 3-4 5

Student hardly focuses in Student occasionally engages in

Engagement Student engages fully
class (e.g. using mobile distracting activities (e.g. using
(40%) in class.
phone). mobile phone) in class.

Student never
Student frequently displays Student rarely
displays
disruptive and/or displays
Behavior disruptive or
disrespectful behavior disruptive or disrespectful behavior
(30%) disrespectful
during during
behavior
class. class.
during class.

Student never makes Student actively

Student occasionally makes
Contribution contributions or makes contributions
contributions that are meaningful
(30%) contributions are that are constructive
and relevant.
irrelevant. and insightful.
ANNEX C: ASSESSMENT CRITERIA FOR CLASS PRESENTATION

Criteria Points
Fail standard Pass standard High standard

(<40 %) (40%-69%) (70%-100%)

Content is attention-getting and provokes thinking, and contains accurate information.

References to source of information are provided whenever required.
20

Material included is relevant to the overall message/purpose. Appropriate amount of

material is prepared. Length of presentation is within the assigned time limits.
20

Visual aids are well prepared, informative, and effective.

20

Speaker maintains good eye contact with the audience.

20

Speaker handles queries raised by the audience appropriately.

20
Total Points 100