Course Code:19BFS506B

Course Title: Risk Management and Derivatives

Course Leader

Savitha Kulkarni
savitha.ms.mc@msruas.ac.in

1
Course Details

• Course: Risk Management and Derivatives

• Department: Management Studies
• Head of the Department: Dr. H S Srivatsa
• Dean: Dr. H S Srivatsa

2
Course Aim and Summary

The course aims to equip the students with basic knowledge of

risk management and to understand the basic features of
derivatives. The students will be taught to identify risk and
measure the risk, hedging risk and practice risk management
using derivatives. Students will be taught to use options and
futures contracts for tactical portfolio strategies purpose.

3
 Course Intended Learning Outcomes
After undergoing this course students will be able to:

No. Intended Learning Outcome

1. Discuss the process of identifying the risk
 

2. Discuss the complexities involved in risk identification and measurement

 

3. Discuss the management of insurance companies

4. Evaluate forwards and futures contracts

5. Realize use of pricing of options and strategies

 

4
 Course Contents

• Introduction to Risk Management and Risk Identification: Risk-

Risk and Uncertainty-Types of Risk-Burden of Risk-Sources of
Risk-Methods of handling Risk-Degree of Risk-Management of
Risk, Risk Management Process.
• Risk Management: objectives, Need for a Rationale for Risk
Management in Organizations- Understanding the cost of Risk-
Individual Risk Management and the Cost of Risk-Risk
Management and Societal Welfare.
• Risk Measurement: Evaluating the Frequency and Severity of
Losses-Risk Control-Risk Financing Techniques-Risk Management
Decision Methods-Pooling Arrangements and Diversification of
Risk. Advanced Issues in Risk Management
5
 Course Contents

• Management of Insurance Companies Functions and

Organization of Insurers: Types of Insurance Organization,
Organizational Structure of Insurance Companies-Functions of
Insurers. Underwriting in Life Insurance and nonlife Insurance.
Claims Management. Insurance Pricing-Insurance Cost and Fair
Premiums, Expected Claim Costs, Investment Income and the
timing of claims Payments, Administrative Costs, Profit
Loading, Capital Shocks and Underwriting Cycles, Price
Regulation, Insurance Risk Analysis. Risk associated with IPO,
FPO and SPO pricing

6
Course Contents

• Financial Derivatives: Derivative Markets and Instruments, Forwards, Futures,

Options and Swaps, Structure of derivatives, Important concepts in financial
derivative market.
• Forwards and Future Contracts: Value of a forward contract, future contract,
hedging using stock index futures, interest rate markets, bond pricing, forward
interest rates.
• Principles of Option Pricing: Option Pricing Models- Binomial Model , Black
-Scholes -Morten Model, Assumptions, Variables in Black -Scholes –Morten
Model, Option strategies.

7
Method of Assessment

There are two components for assessment in this course:

• Component ‐ 1: 50% weight (CE)

 
• Course Leader can choose from the following at their discretion: Assignment/
Case Study discussion/ Surprise Quiz/ Field work/ Role play/ Poster presentation/
Group Discussion/ Video demonstration/ Write ups/ Debate / Term paper

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Method of Assessment

• Component ‐ 2: 50% weight (SEE)

• A three hour duration semester end examination for a maximum of 100 marks
will be conducted and reduced to 50% weight

9
Method of Assessment

Focus of COs on each Component or Subcomponent of Evaluation

Component 1: CE (50% Weightage) Component 2: SEE (50%
Subcomponent  SC1 SC2 SC3 Weightage)
Subcomponent Type  Term Test Term Test Assignment
100 Marks
Maximum Marks  25 25 25
C O -1  
C O -2  
C O -3  
C O -4  
C O -5  
T h e d e t a ils o f S C 1 , S C 2 , S C 3 o r S C 4 a r e p r e s e n t e d in t h e P r o g r a m m e S p e c ifi c a ti o n s D o c u m e n t .

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Course Resources

III. Course Resources

• Essential Reading

1. Principles of Risk Management and Insurance, George E Rejda,

(2009),Twelfth Edition, Pearson, New Delhi
2. Options Futures & Other Derivatives - John C. Hull, 6/e, Pearson Education.

• Recommended Reading
1. Class notes and handouts
2. Options & Futures- Vohra & Bagri, 2/e, TMH
3. Derivatives, Principles and Practice, Sundaram& Das, Mc Graw Hill, 2013

11
Course Resources

• Magazines and Journals

• Magazines and Journals
• Bloomberg Markets
• Money Magazine
• Asia Pacific Financial Markets Journal, Springer
• The Quarterly Review of Economics and Finance, Elsevier
• Journal of Risk

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 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

1 27.10.2021 9.55 -10.45 Wednesday Introduction to Risk Ms. Savitha Kulkarni

Management and Risk
Identification:
2 28.10.2021 9.55 -10.45 Thursday Risk-Risk and Ms. Savitha Kulkarni

3 28.10.2021 11.15- 12.05 Thursday Uncertainty-Types of Risk- Ms. Savitha Kulkarni

Burden of

4 03.11.2021 9.55 -10.45 Wednesday Risk-Sources of Risk- Ms. Savitha Kulkarni

Methods of handling

5 04.11.2021 9.55 -10.45 Thursday Risk-Degree of Risk- Ms. Savitha Kulkarni

Management of Risk,

6 04.11.2021 11.15- 12.05 Thursday Risk Management Ms. Savitha Kulkarni

Process.

13
 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

7 10.11.2021 9.55 -10.45 Wednesday Risk Management: Ms. Savitha Kulkarni

objectives,

8 11.11.2021 9.55 -10.45 Thursday Need for a Rationale for Ms. Savitha Kulkarni
Risk Management in
Organizations-
9 11.11.2021 11.15- 12.05 Thursday Understanding the cost of Ms. Savitha Kulkarni
Risk-
10 17.11.2021 9.55 -10.45 Wednesday Individual Risk Ms. Savitha Kulkarni
Management and the Cost
of Risk-
11 18.11.2021 9.55 -10.45 Thursday Risk Management and Ms. Savitha Kulkarni
Societal Welfare.

12 18.11.2021 11.15- 12.05 Thursday Ms. Savitha Kulkarni

14
 Course Delivery Schedule (Theory)
Number of Course Credits: 3

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

13 24.11.2021 9.55 -10.45 Wednesday Risk Measurement: Ms. Savitha Kulkarni

Evaluating the Frequency
and Severity of Losses
14 25.11.2021 9.55 -10.45 Thursday Risk Control-Risk Ms. Savitha Kulkarni
Financing Techniques-

15 25.11.2021 11.15- 12.05 Thursday Risk Management Ms. Savitha Kulkarni

Decision Methods-
16 01.12.2021 9.55 -10.45 Wednesday Pooling Arrangements and Ms. Savitha Kulkarni
Diversification of Risk.

17 02.12.2021 9.55 -10.45 Thursday Advanced Issues in Risk Ms. Savitha Kulkarni
Management

18 02.12.2021 11.15- 12.05 Thursday Management of Ms. Savitha Kulkarni

Insurance Companies
Functions and
Organization of Insurers:
Types of Insurance 15
 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additio

sio nal
n Activity
No.
19 08.12.2021 9.55 -10.45 Wednesday Organizational Structure of Insurance Ms. Savitha
Cycles, Kulkarni

20 09.12.2021 9.55 -10.45 Thursday Companies-Functions of Insurers. Ms. Savitha

Underwriting in Life Insurance and Kulkarni
nonlife Insurance. Income and the
timing of
21 09.12.2021 11.15- 12.05 Thursday claims Payments, Administrative Costs, Ms. Savitha
Kulkarni

22 15.12.2021 9.55 -10.45 Wednesday Claims Management. Insurance Ms. Savitha

Pricing-Insurance Cost and Fair Kulkarni

23 16.12.2021 9.55 -10.45 Thursday Premiums, Expected Claim Costs, Ms. Savitha
Investment Kulkarni

24 16.12.2021 11.15- 12.05 Thursday Profit Loading, Capital Shocks and Ms. Savitha
Underwriting Kulkarni 16
 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

25 22.12.21 9.55 -10.45 Wednesday Price Regulation, Ms. Savitha Kulkarni

Insurance Risk Analysis.

26 23.12.2021 9.55 -10.45 Thursday Risk associated with IPO, Ms. Savitha Kulkarni
FPO and SPO pricing

27 23.12.2021 11.15- 12.05 Thursday Financial Derivatives: Ms. Savitha Kulkarni

Derivative Markets and
Instruments,
28 29.12.2021 9.55 -10.45 Wednesday Forwards, Ms. Savitha Kulkarni

29 30.12.2021 9.55 -10.45 Thursday Futures, Options and Ms. Savitha Kulkarni
Swaps,.

30 30.12.2021 11.15- 12.05 Thursday Structure of derivatives, Ms. Savitha Kulkarni

Important concepts in
financial derivative market
17
 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

31 05.01.2022 9.55 -10.45 Wednesday Forwards and Future Ms. Savitha Kulkarni
Contracts: Value of a
forward contract,
32 06.01.2022 9.55 -10.45 Thursday future contract, Ms. Savitha Kulkarni

33 06.01.2022 11.15- 12.05 Thursday hedging using stock index Ms. Savitha Kulkarni
futures,

34 12.01.2022 9.55 -10.45 Wednesday interest rate markets,. Ms. Savitha Kulkarni

35 13.01.2022 9.55 -10.45 Thursday bond pricing, Ms. Savitha Kulkarni

36 13.01.2022 11.15- 12.05 Thursday forward interest rates Ms. Savitha Kulkarni

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 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

37 19.01.2022 9.55 -10.45 Wednesday Principles of Option Ms. Savitha Kulkarni

Pricing: Option Pricing
Models-
38 20.01.2022 9.55 -10.45 Thursday Binomial Model , Ms. Savitha Kulkarni

39 20.01.2022 11.15- 12.05 Thursday Black -Scholes -Morten Ms. Savitha Kulkarni
Model,

40 26.01.2022 9.55 -10.45 Wednesday Assumptions, Ms. Savitha Kulkarni

41 27.01.2022 9.55 -10.45 Thursday Variables in Black -Scholes Ms. Savitha Kulkarni
–Morten Model,

42 27.01.2022 11.15- 12.05 Thursday Option strategies. Ms. Savitha Kulkarni

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 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

43 02.02.2022 9.55 -10.45 Wednesday Ms. Savitha Kulkarni

44 03.02.2022 9.55 -10.45 Thursday Ms. Savitha Kulkarni

45 03.02.2022 11.15- 12.05 Thursday Ms. Savitha Kulkarni

46 09.02.2022 9.55 -10.45 Wednesday Ms. Savitha Kulkarni

47 10.02.2022 9.55 -10.45 Thursday Ms. Savitha Kulkarni

48 10.02.2022 11.15- 12.05 Thursday Ms. Savitha Kulkarni

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 Course Delivery Schedule (Theory)
Number of Course Credits: 2

Ses Date Time Day Topic Delivered By Additional

sio Activity
n
No.

49 09.02.2022 9.55 -10.45 Wednesday Strategies- Butterfly Ms. Savitha Kulkarni

50 10.02.2022 9.55 -10.45 Thursday CONDOR Strategy Ms. Savitha Kulkarni

51 10.02.2022 11.15- 12.05 Thursday Revision Ms. Savitha Kulkarni

52 17.02.2022 9.55 -10.45 Wednesday Revision Ms. Savitha Kulkarni

53 18.02.2022 9.55 -10.45 Thursday Revision Ms. Savitha Kulkarni

54 18.02.2022 11.15- 12.05 Thursday Revision Ms. Savitha Kulkarni

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Disclaimer

• All data and content provided in this presentation are

taken from the reference books, internet – websites
and links, for informational purposes only.

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