Syllabus
Purpose:
The purpose of this module is to enable you to demonstrate knowledge of and engagement with
respect to financial risks and sources of market risk that affect organisations by explaining the
risks and risk factors. You should also understand the complexities and uncertainties associated
with applying the management of market risk by identifying and evaluating the risks of instruments
in a portfolio. Furthermore, you should know how to apply the management of market risk by
identifying and evaluating the risks of instruments in a portfolio. You should be able to interrogate
various methods of market risk management in order to formulate market risk management
solutions for an organisation and be able to present and communicate market risk management
strategies.
Module-specific outcomes:
1. You will be able to demonstrate knowledge of and engagement with respect to financial risks
and sources of market risk that affect organisations by explaining the risks and risk factors.
2. You will be able to demonstrate an understanding of the complexities and uncertainties
associated with applying the management of market risk by identifying and evaluating the
risks of instruments in a portfolio.
3. You will understand the complexities and uncertainties involved in selecting, applying and
managing market risk within an organisation by evaluating various methods of market risk
management.
4. You will be able to interrogate various methods of market risk management in order to
formulate market risk management solutions for an organisation.
5. You will be able to present and communicate market risk management strategies by rigorous
interpretation of the appropriate risk management tools to defend a market risk management
scenario.
6. You will be able to demonstrate an ability to take full responsibility for your work, decisionmaking and use of resources, and to apply, in a self-critical manner, learning strategies that
effectively address professional needs and needs related to ongoing learning.
Prescribed book:
The prescribed book for RSK4805 is as follows:
Hull, JC. 2018. Risk management and financial institutions. 5th edition. Hoboken, NJ: Wiley
Publishing. ISBN: 9781119448112
e-book – ISBN: 9781119448167
Outlay of the module
Topic 1 – Introduction
Topic 1 covers learning units 1 to 3 and introduces market risk management, including sources
and challenges of market risk management, concepts relating to risk and return (LU1), an
overview of the financial services industry (LU2) and the regulatory requirements for market risk
management (LU3). You must first complete the short quiz at the end of learning unit 0 before the
study material for Topic 1 will become available. You need to work through the study material for
this topic. Thereafter you have to complete an online assessment that will count towards your
year mark.
Learning unit
1 – Introduction
2 – Financial institutions
3 – Regulation
Chapter
1
2-4
15 - 18
Topic 2 covers learning units 4 to 6 and deals with financial derivatives, interest rate risk, volatility,
correlation and how traders manage risks. Market risk is defined as a decrease in profitability due
to adverse events within an organisation. Market risk includes commodity risk, equity risk,
exchange rate risk and interest rate risk.
Learning unit
4 – Trading in financial markets
5 – Interest rate exposure
6 – Volatility and correlation
Chapter
5
8-9
10 - 11
Topic 3 covers learning units 7 to 9 and focuses on how to measure market risk by means of
value at risk (VaR), scenario analysis and stress testing. The last learning unit deals with the
implementation of market risk within an organisation.
Learning unit
7 – Value at risk
8 – Scenario analysis and stress testing
9 - Conclusion
Chapter
12 - 13
7 and 22
29