Assignment:
There will be a group assignment. The class would be paired into groups of either THREE or
FOUR which will depend upon the work effort involved in the group assignment. Each group
will have one assignment during the course period which will take the form of a 25 minute
presentation based on an assigned issue/problem. Each group should also circulate a typed
text to the class one day prior to their presentation. The assignment will be graded on the
intellectual coherence and overall quality of the typed text plus the quality of the presentation
which will also include aspects such as presentational innovation and time management.
Group presentations will take place only after getting go ahead signal from the course
facilitator.
Other Information:
Recommended to carry calculator and course material to all the sessions. The students opting
for this course should have sound knowledge in basic statistics and mathematics. More so
they should be interested in dealing with numbers and equations. No plagiarism in
assignments, projects or exams will be tolerated and will be dealt with strictly. No request for
postponement of deadlines. Students whose preparation for the session is deemed
unsatisfactory will be asked to leave the class and no attendance will be given for the same.
Course Content:
Session 1-2: Risk and Risk Management Theory
Discussion a. Why is financial risk management important?
b. Why do firms hedge the financial risks?
c. Risk management in banks and other financial institutions
Case
Risk Management at Apache
Readings
Why manage risk?, HBS, 9-294-107, 2001
Owning the right risk: Kevin Buehler, Andrew Freeman, and Ron Hulme,
Harvard Business Review, September 2008.
The Six Mistakes Executives Make in Risk Management, N. N. Taleb, D. J.
Goldstein, and M. W. Spitznagel , Harvard Business Review, October 2009
Session 3-6: Forwards and Futures
Discussion a. Introduction to financial forwards and futures
b. Pricing and valuation of forwards and futures
c. Hedging and basis risk
d. Commodity futures
Case
Metallgesellschafts Hedging Debacle
Lufthansa
Readings
Chapters 2, 3, & 5 of OFOD
Financial futures: Scott P Mason, Harvard Business School , December
1999.
Session 7-12: Options
Discussion a. Introducing Options: Call and Put
b. Options arbitrage relationships
c. Option pricing models: BOPM & BSM
d. Options prices and valuations of options
e. Options Greeks and delta hedging
Cases
Sally Jameson: Valuing Stock Options in a Compensation Package
Pine Street Capital
Whatever Happened at Barings? Part I and Part II
Readings