PGDM Core Subject

Risk Management & Financial Engineering

Course Objective

Primary PO Mapping: PO1 (Tech Integration) & PO2 (Critical Thinking).

Strategic Focus: Utilizing advanced modeling and derivatives to evaluate and mitigate complex industrial financial risks.

Mandatory Textbook: Options, Futures, and Other Derivatives by John C. Hull.

Component	Marks	Description	Mapped CO
Simulation	20	The Hedging Challenge: Using derivatives to protect a corporate portfolio from market volatility.	CO2, CO4
Case Study	10	"The Derivatives Disaster": Forensic analysis of a major financial failure (e.g., Barings Bank). +1	CO4
Presentation	10	"The Risk Mitigation Plan": Defending a strategy to manage currency or interest rate risk.	CO5
Mid Term	10	Internal written exam covering Forward, Futures, and Options basics.	CO1, CO2
Project	10	"Monte Carlo Simulation": Building a risk model in Excel to predict potential losses.	CO3
Class Participation	10	Active participation in financial modeling labs.	All

20-Session Plan

Session	Topic	Pre-Reading (Hull)	Daily Assignment
1	Introduction to Financial Risk & Engineering	Ch 1: Introduction
2	Mechanics of Futures Markets	Ch 2: Futures Markets
3	Hedging Strategies Using Futures	Ch 3: Hedging with Futures	A1: Basis Risk Analysis
4	Interest Rates & Duration Gap Analysis	Ch 4: Interest Rates
5	Determination of Forward & Futures Prices	Ch 5: Forward Prices	A2: Arbitrage Modeling
6	Swaps: Interest Rate & Currency	Ch 7: Swaps
7	Mechanics of Options Markets	Ch 10: Options Markets	A3: Put-Call Parity Lab
8	Properties of Stock Options	Ch 11: Stock Options
9	Trading Strategies Involving Options	Ch 12: Trading Strategies	A4: Option Greek Matrix
10	Mid-Term Internal Exam	Review Sessions 1–9	Mid-Term (10M)
11	Binomial Trees for Valuation	Ch 13: Binomial Trees
12	Black-Scholes-Merton Model	Ch 15: Black-Scholes	A5: Volatility Surface
13	Value at Risk (VaR) & Expected Shortfall	Ch 22: Value at Risk
14	Greek Letters & Delta Hedging	Ch 19: Greek Letters	A6: Dynamic Hedging
15	Simulation Lab: The Hedging Challenge	Manual: Trading Volatility	Simulation (20M)
16	Volatility Smiles & Credit Risk	Ch 20 & 24
17	Real Options in Capital Budgeting	Ch 34: Real Options
18	Ethical Governance: Avoiding Sunk Costs	Case Study: Concorde Fallacy
19	Presentation: Risk Mitigation Plan	Manual: Strategic Defense	Presentation (10M)
20	Course Synthesis & Review	Review of Risk Frameworks