Details

The coursework assignment for this module is an individual essay worth 30% of the overall module mark.

Coursework Brief

Warren Buffet once described derivatives as ‘financial weapons of mass destruction’. Discuss the benefits and risks to firms of hedging with derivatives.

Reading for this coursework will be given below

Key Marking criteria will include:

• Initiative: originality, innovativeness of answer
• Assignment Structure: clarity of aims, objective, structure and presentation
• Quality of Writing: Readability and ability to convey key message(s) concisely
• Understanding of established knowledge
• Insightfulness of Analysis: Interest and usefulness of findings, conclusions drawn.
• Understanding: Assignment demonstrates students have understood key topics
• Overall Quality of Assignment

Please note:

• The maximum file size that can be uploaded is 20mb. If your file is larger than this it is usually because you have included a lot of images – you should either remove some if possible, or else convert them to a more efficient format to bring the file size down (e.g. .png or .gif).

Derivatives – risks and benefits: References

Berkshire Hathaway Annual Report (2002)

http://www.berkshirehathaway.com/2002ar/2002ar.pdf

Edwards and Cantor ‘The collapse of Metallgesellschaft, unhedgeable risks, poor hedging strategy or just bad luck’, The Journal of Futures Markets, 1995, issue 3, pgs 211-264 (available through library electronic journals – EBSCO)

Sill K ‘The economic benefits and risks of derivative securities’, Federal Reserve Bank of Philadelphia, Jan/Feb. 1997 pgs. 15-26

http://www.philadelphiafed.org/research-and-data/publications/business-review/1997/january-february/brjf97ks.pdf

Case study: ‘Not Just One Man – Barings’ – download from http://ifci.ch/137550.htm

Case study of rogue trader John Rusnak: ‘How to lose a billion’ – download from: http://www.guardian.co.uk/business/story/0,3604,818620,00.html

Richard Cobbs and Alex Wolf ‘Jet Fuel Hedging Strategies: Options Available for Airlines and a Survey of Industry Practices’ Kellogg School of Management Discussion Paper

Spring 2004

http://www.kellogg.northwestern.edu/research/fimrc/papers/jet_fuel.pdf