Page 4 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

SYLLABUS
Derivatives & Risk Management

Objectives: To provide a basic understanding of financial derivatives as well the application of derivatives, trading
mechanism, uses as hedging instruments, risks involved and legal, controlling and regulatory framework.

To provide knowledge, understanding of practical investments and corporate financial management strategies (such as
hedging or risk mitigation) using various derivatives in a manner which will allow students to apply these concepts and skills
in their careers.
Sr. No. Description
1. Introduction to derivatives: Definition, types of derivatives, Uses of derivatives, Exchange-traded vs. OTC
derivatives, Derivatives in India, Regulation for derivatives trading and SEBI guidelines related to derivatives
trade.
2. Introduction to Forwards and Futures: BasicHedging practices, Forward contracts, Limitations of forward
markets, Introduction to futures, Stock Index futures, Commodity Futures and Currency Futures, Distinction
between futures and forwards contracts, pay-offs, Cash settlement vs Physical settlement, Pricing Principles,
Beta and Optimal Hedge Ratio.
3. Introduction to Options: Option terminology and Types, Index derivatives, European and American calls and
puts, Exotic and Asian Options, Stretagies and Pay-offs, Option Pricing and Put-Call parity.
4. Swaps: Meaning, overview, interest rate swaps, currency swaps, credit risk, mechanics of swaps.
5. Interest Rate Derivatives & Euro-Dollar Derivatives: T-Bill and T-bond Futures, Euro-Dollar Derivatives,
Forward Rate Agreement (FRA), Duration, Convexity.
6. Credit Derivatives: Types of Credit Derivatives, Credit Default Swaps, Collateralized Debt Obligations, The
Indian Scenario, credit risk mitigation, Weather and Energy Derivatives.
7. Risk Management with Derivatives: Hedging Using Greeks (Delta-Gamma Hedging), Hedging with Futures
(Strategies of hedging, speculation and arbitrage): Index Options and futures, VaR, Historical Simulations, Risk
management structure and policies in India.
8. Management of Derivatives Exposure: Introduction, nature of derivatives trading, setting of Risk-vision,
reasons for managing derivatives risk and types of risk in derivative trading. Futures and options trading
system, Basis of trading.