25763 Corporate Treasury Management

Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Postgraduate

Result Type: Grade and marks

Requisite(s): 25762 Synthetic Financial Products AND 25765 Corporate Finance
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.

Handbook description

This subject deals with the management of financial price risk in a corporate treasury environment. Students are able to understand and identify financial price risk, measure exposure, set objectives, measure performance and adopt appropriate tactics and strategies, via use of forwards, futures, swaps and options.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

Understand that due to continuous market volatility financial risk management have become an integral part of doing business.
Understand risk-return profiles assumed by a corporate or an individual.
Understand the financial instruments adopted by corporate treasuries as financial risk management tools.

Contribution to graduate profile

Risk and Hedging provides the course with a specific focus on risk management from the corporate perspective. Features of corporate finance, international finance and investment analysis are drawn upon to assess the risk of the corporate treasury's operation and the management of its cash flows.

Teaching and learning strategies

The subject will be taught using a combination of lectures and workshops. These classes will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTS Online) will be used to share information and encourage interaction between staff and students. Students will also use appropriate computer software such as spreadsheets and word processors to complete assigned tasks.

Content

Corporate Treasury Management - Objectives, Functions, Structure, Centralisation vs Decentralisation, Information requirements
Treasury Performance Measurement -Quantifying Financial Price Risk
Tools for Managing Financial Price Risk and the impact of Risk Management Strategy
Determinants of hedging, Setting up a hedge, Hedging strategy
Forward Contracts and using Forwards to Manage Financial Price Risk
Futures and using Futures to Manage Financial Price Risk
Swaps and using Swaps to Manage Financial Price Risk
Options and using Options to Manage Financial Price Risk
'New' Risk Management Products, Hybrid Securities, Measuring and Managing Default Risk
Managing Financial Price Risk in a Portfolio of Derivatives.

Assessment

Two Quizzes (Individual)	40%
The quizzes are designed to assess students' understanding of the theories and concepts to demonstrate that students have met objectives 1-3.
Final Exam (Individual)	60%
This exam, consisting of multiple choice and short answer questions, will test students' understanding of the theory and their ability to apply the theory to financial management decisions. This will enable students to demonstrate that they have met objectives 1-3.

Recommended text(s)

Smithson, C. W. (1998). Managing Financial Risk, 3rd ed., McGraw-Hill.

Indicative references

Allan, R., Elstone, R., Lock, G., and Valentine, T. (1990). Foreign Exchange Management, Allen and Unwin.

Campbell, T S. and Kracaw, W A. (1993). Financial Risk Management, Harper Collins.

Daugaard, D., Valentine, T. (1995). Financial Risk Management, Harper Educational.

Madura, J. (1998). International Financial Management, 5th ed, South-Western.

Shapiro, A C. (2003). Multinational Financial Management, 7th ed., John Wiley.

Skully, M T., et al. (1997). Handbook of Australian Corporate Finance, 5th ed., Butterworths.

Stern, J M and Chew, D H. (1988). New Developments in International Finance, Basil Blackwell.

Stern, J M and Chew, D H. (2003). The Revolution in Corporate Finance, 4th ed., Blackwell Publishing.