25842 Financial Markets and Risk

Subject level: Postgraduate

Handbook description

Over the last two decades the globalisation of financial markets has increased competitiveness between financial institutions and seen the development of new techniques to invest funds. Rapid improvements in technology have opened up new opportunities for investors and borrowers. This subject develops an understanding of how different types of financial institutions, financial markets and financial instruments play important roles in the Australian financial system. The different ways that businesses raise funds and the various financial risk management tools employed is examined.

Subject objectives/outcomes

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

1. Understand the principal functions performed by the financial system.
2. Understand the operations of financial institutions and the risks they face and manage.
3. Describe financial instruments and their risk and return characteristics.
4. Demonstrate how derivatives and forward contracts can be used for risk management.
5. Understand the reasons for controls and procedures in corporate treasuries as well as compliance of these in practice.
6. Appreciate the need for treasury performance measurement.
7. Identify and measure exposures to financial risks.

Contribution to graduate profile

This subject assists students in developing a broad knowledge of the instruments, institutions and markets that comprise the financial system, and in understanding the dynamics that influence the behaviour of financial markets and the value of financial instruments.

Due to continuous market volatility and changes in exchange rates, commodity prices and interest rates, financial risk management techniques and instruments have become an integral part of doing business, both domestically and globally. The theme of the course revolves around risk-return profiles assumed by a corporation. In essence, the basic principle involved is risk management of cash flows. This may be achieved by identifying company financial risks, measuring exposures, setting objectives, measuring performance, and adopting various tactics and strategies. Basic financial instruments like forwards, futures, swaps and options can be adopted by corporate treasuries as financial risk management techniques in an underlying attempt to achieve a particular risk-return profile and manage or minimise financial price risk.

Teaching and learning strategies

The subject uses lectures, workshop discussion, exercises and case studies to allow participants to build their understanding of capital markets, financial instruments and risk management strategies. These methods will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTSOnline) will be used to share information and encourage interaction between staff and students.

Content

• Australian payment systems
• The money market, bond market, equity market, and foreign exchange market
• Interest-rate risk management
• Financial futures, swaps and options
• Corporate treasury, risk management and performance measurement
• Identifying, measuring and managing exposures to financial price risk

Assessment

Assessment item 1: Mid-semester Exam (Individual)

Assessment item 2: Case Study (Individual)

Assessment item 3: Exam (Individual)