Treasury Management BUS 288 UILG 2021 PDF

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Unit information and learning guide for treasury management 2021 BUS 288 Unit information and learning guide for treasury management 2021 BUS 288...

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BUS288 Treasury Management

Unit Information and Learning Guide TSD 2021

This information should be read in conjunction with the online learning materials which can be found on your MyUnits page.

Unit coordinator Dr Grant Cullen Murdoch Business School College of Arts, Business, Law and Social Sciences

© Published by Murdoch University, Perth, Western Australia, December, 2021.

This publication is copyright. Except as permitted by the Copyright Act no part of it may in any form or by any electronic, mechanical, photocopying, recording or any other means be reproduced, stored in a retrieval system or be broadcast or transmitted without the prior written permission of the publisher.

Contents Unit information Information about the unit Contact details How to study this unit Resources for the unit Study schedule Assessment

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Learning guide Introduction Concise Learning Guide / Study Schedule Topic 1 Financial System, Price Determination, Trading Topic 2 Equity Markets Topic 3 Debt Markets Topic 4 Analysis of the Yield Curve Topic 5 Interest Rate Risk and Duration Topic 6 Futures markets - Commodity Pre-Test Revision Topic 7 Futures Markets - SPI, Interest Rates Topic 8 Forward Rate Agreements Topic 9 Basic Options Concepts Topic 10 Option Hedging Strategies Topic 11 Interest Rate Swaps

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Information about the unit Welcome to: BUS288 Treasury Management

Unit description The unit provides an introduction to fundamental concepts associated with the management of risk within an institution. Broadly, it will cover the basic financial engineering tools, the yield curve and the pricing of fixed income instruments. Specific instruments including futures, Forward Rate Agreements (FRAs), options and swaps will be discussed in detail. The unit will also consider the trading environment, focusing on market structures and function.

Prerequisites BUS130 Foundational Mathematics for Business / BUS140 Principles of Finance and Banking.

Aims of the unit To provide students with the skills to: 1. calculate the price sensitivity of interest rate instruments; 2. use futures and options to achieve speculative goals with respect to commodities, financial futures, stocks and indices; 3. set up a hedge for a position in commodities using futures; 4. set up a hedge for a position in interest rate instruments using futures, forward rate agreements, options and swaps and other derivative instruments; 5. set up an arbitrage position using combinations of financial instruments and derivatives, and be able to explain how the process of arbitrage will restore price equilibrium.

Learning outcomes for the unit On successful completion of the unit you should be able to: LO1: Discuss the manner in which financial instruments are traded on financial markets; LO2: Explain the concept of arbitrage, and its implications for market efficiency; LO3: Apply arbitrage concepts to the valuation of financial instruments; LO4: Critically evaluate the features and uses of the major derivative instruments; LO5: Describe the role of hedged positions and how they can be set up and maintained; LO6: Communicate financial information to a variety of stakeholders. LO7: Evaluate the likelihood default on derivative positions and the role of reputation capital in enforcing ethical outcomes. LO8: Integrate the concepts of pricing financial instruments with jurisdictional differences in the operation of financial markets.

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Graduate attributes developed in the unit This unit will contribute to the development of the following Graduate Attributes. Communication Critical and creative thinking Independent and lifelong learning In-depth knowledge of a field of study

What you need to know Generic information which students need to know is available at What you need to know web page. The information includes:  links to the Assessment Policy  a description of Academic Integrity  links to information about: Examinations; Non-discriminatory language; Student appeals; Student complaints; Conscientious objection and assessment policy  determination of grades from components/marks  information for equity students

This unit was originally written by Grant Cullen, 1996 Revised by Grant Cullen, 2021

Contact details Unit Coordinator’s contact details Name: Dr Grant Cullen Email: [email protected]

Local Affiliate contact details You will be notified who your local affiliate will be at the beginning of the teaching period. They will provide you with their contact details directly.

Administrative contact details If you cannot get in touch with your unit coordinator, please contact: [email protected] Tel: +618 9360 2705

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How to study this unit Students are expected to view the video podcasts and read the relevant chapters from the text. It is also expected that students will have attempted all of the end-of-chapter and handout questions relating to the previous session’s material specified in the study guide, in addition to those required for weekly submission. Solutions to these questions will be released through LMS on the dates indicated. Students are expected to review their understanding of these questions, and to supplement and test their understanding of the topic material by completing the on-line Perdisco tutorial before proceeding to the Perdisco assessment questions.

Contact time This course will be delivered fully online through LMS. It is set up for the study of one topic per week over the 12-week trimester. While the ‘workshop’ is being replaced by previous lecture recordings and an interactive on-line session with the local lecturer, weekly study may be thought of as consisting of three interconnected components; pre-workshop, workshop and post-workshop. Pre-workshop will include video podcasts and textbook readings. Edited recordings of lectures delivered on the Perth campus have been uploaded to LMS. These substitute for ‘workshops’ that would have been delivered in the absence of Covid-19. They will be supplemented by interactive online classes using Blackboard Collaborate where students are able to ask questions to clarify gaps in understanding of the material, and obtain an explanation of the solutions to the end-of-chapter and handout questions from the previous week. Post-workshop will include summarising and reflecting on the topic/s covered and completing the Perdisco on-line tutorial and assessment questions. Attempting set end-ofchapter and handout questions in preparation for the following week’s interactive session.

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Time commitment As this is a three-credit point unit, we expect you to spend on average 12 hours per week for the total weeks of this teaching period (or 150 hours overall) working on this unit.

Weekly assignments / online tutorials Students are required to complete the Perdisco on-line tutorials and assessments as well as submitting brief weekly assignments as described in the Assessment details section.

Resources for this unit To undertake study in this unit, you will need: Essential textbook Viney, C. and Phillips, P., Financial Institutions, Instruments and Markets, 9 th Edition, McGraw-Hill, 2019. ISBN: 9781760422943 Other references/recommended reading Chance, D.M. and Brooks, R., An Introduction to Derivatives & Risk Management, 10th Edition, Cengage South-Western, Ohio, 2016. Daugaard, D and Valentine, T, Financial Risk Management - A Practical Approach to Derivatives, Harper Educational Publishers, 1995. Gottesman, A., Derivatives Essentials: An Introduction to Forwards, Futures, Options and Swaps. Wiley, 2016. Hull, J.C., Fundamentals of Futures and Options Markets, 8th Edition, Pearson, 2017. Marshall, J.F. and Kapner, K.R., Understanding Swaps, John Wiley and Sons Inc, Brisbane, 1993. Peirson, G., Brown, R., Easton, S., Howard, P. and Pinder, S., Business Finance, 12th edition, McGraw-Hill, 2015. ISBN: 9781743078976. Financial Press - Students are expected to keep abreast of current developments in the capital markets by reading the Australian Financial Review and the business section of newspapers.

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Online resources

You will require a subscription to the Perdisco online e-workbook: www.perdisco.com.au/login more details are provided in the assessment section. The Unit Welcome Page, and Online Unit can be accessed from your MyUnits page.

Lecture overheads, datasets, handout questions and tutorial solutions will be made available on-line. Students should regularly check notices which are posted as a means of communicating information. The Australian Stock Exchange (http://www.asx.com.au) has a particularly useful website.

The following will be provided during the teaching period: lecture slides lecture recordings digital media (podcasts) workshop handouts

Urkund Your Unit Coordinators may use software called Urkund when viewing work that you submit. Urkund is a pattern-matching system designed to compare work submitted by students with other sources from the internet, journals/periodicals, and previous submissions. Its primary purpose is to detect any submitted work that is not original and provide a thorough comparison between the submitted document and the original sources. More information about how to avoid plagiarism is contained within the Murdoch Academic Passport (MAP) unit https://moodleprod.murdoch.edu.au/course/view.php?id=2684 . University policies on academic integrity can be accessed here: http://our.murdoch.edu.au/Educational-technologies/What-you-need-to-know/

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Study schedule Week

Topic/Project/Study theme

Assessment items

Due

1.

Financial System

Assignment 1

Sept 11

Price Determination

Perdisco

Sept 19

Assignment 2

Sept 18

2.

Equity Markets

Perdisco

Sept 26

Assignment 3

Sept 25

Perdisco

Oct 3

Assignment 4 Perdisco

Oct 2

Interest Rate Risk and Duration

Assignment 5

Oct 16

Perdisco

Oct 24

6.

Pre-Test Revision

Mid-Term Test

Week of Oct 10th

7.

Futures Markets Commodity

Assignment 6

Oct 23

Perdisco

Oct 29

Futures Markets - Financial

Assignment 7 Perdisco

Oct 30

Assignment 8

Nov 6

Perdisco

Nov 14

Assignment 9

Nov 13

Perdisco

Nov 21

Assignment 10

Nov 20

Perdisco

Nov 28

3.

4.

5.

8.

9.

10.

11.

12.

Debt Markets

Analysis of the Yield Curve

Forward Rate Agreements Basic Options Concepts Option Hedging Strategies

Interest Rate Swaps

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-----------

Oct 17

Nov 7

Assessment Assessment for this unit is conducted in accordance with the Assessment Policy.

Schedule of assessment items You will be assessed on the basis of: Assessment item Description

Weekly Assignments

Preparation and engagement

Mid-Term Quiz

On-line LMS – Timed MCQ

Perdisco e-workbook

Best of two attempts On-line Calculations and Timed MCQ

Final Examination

Aligned Learning Outcomes

Value

Due

1, 3, 6

10%

Ongoing

2, 3, 4, 5

25%

Week commencing Oct 10th

2, 4, 6 1, 3, 4, 7, 8

20% 45%

~Weekly

Exam period (Dec 4 – Dec 9)

Assessment details WEEKLY ASSIGNMENTS Each week, two problems from the ‘tutorial questions’ listed in the Learning Guide / Study Schedule. These are assessed for evidence that the student has engaged with the topic material prior to the class in which the questions will be discussed. Accordingly, they must be submitted by 11.59 pm each Saturday as follows: Assignmen t 1 2 3 4 5 6 7 8 9 10

Problems* VP1-2,8 VP6-12,14 VP9-7; 10-13 Handout 1-1,2 VP14-8,13 Handout 2-1,2 Handout 3-1,2 VP19-15; Handout 4-2 Handout 5-2,3 Handout 6-1,2

Due Date Sept 11 Sept 18 Sept 25 Oct 2 Oct 16 Oct 23 Oct 30 Nov 6 Nov 13 Nov 20

*VP denotes Viney and Phillips; 1-2,8 denotes ‘chapter 1, problems 2 and 8’. Handout questions are posted on LMS.

These assignments need to be submitted through LMS. Only word documents may be uploaded, therefore any images (such as photographs of handwritten calculations or diagrams) must be embedded as pictures within the word document. Alternatively, an

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equation editor such as MathType may be installed as an add-in to word. The free version of MathType is adequate. https://mathtype.en.softonic.com/download

Solutions will be posted on LMS at midnight on the Saturday of each week (or as indicated on LMS), and therefore late assignments will not be marked. IN-TERM QUIZ The time and date for the mid-term quiz will be confirmed during the trimester. However, it is intended that it will be of two hours duration and held on-line in a time-window on the week commencing October 10th and will be of two hours duration. The test may be accessed using the link from the LMS page under Section Mid-Term Quiz, Post Workshop, that looks like:

The test will examine the material covered in class during sessions 1 to 4 as detailed in the learning guide / study schedule.

PERDISCO e-WORKBOOK Students are required to complete the Perdisco on-line tutorial questions. In each of 10 topics that follow the Concise Learning Guide / Study Schedule and marked with (*) on the dates they are made active, three assessment questions are set. Commonly, each topic will remain active for 14 days following the workshop, after which students will be unable to complete the assessment. (See the Perdisco website for exact closing dates.)

(www.perdisco.com.au/login) An online study resource has been developed for this unit to help you learn the content that will be covered this semester. Using hundreds of interactive practice questions and problem solving exercises, the e-workbook helps you make the most of your limited study time by offering:   

The chance to practice, revise and focus on each topic until you completely understand it Step-by-step feedback explaining why each answer you have given was correct or incorrect Help that’s available when you need it (even outside of normal class hours)

The e-workbook can be purchased online by credit card or PayPal. Payment instructions are provided after registration. To start using the e-workbook, visit www.perdisco.com.au/login and register an account.

E-workbook assignments The e-workbook is also being used to deliver interactive assessment tasks that will contribute to your overall assessment marks for this unit. The assessments can be submitted online from anywhere, are marked instantly and give you immediate feedback on your performance.

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Examination FINAL EXAMINATION The final examination will be completed during the examination period. The details about the structure and availability of this exam will be advised towards the end of the trimester. It will consist of two parts. It will consist of calculation questions addressing material covered over the entire course, and multiple-choice questions focussing on topics 5 onward. and Part B will consist of calculations. The LMS quiz tool includes an equation editor that may be used to transpose calculations executed on paper. The quiz tool also permits table to be drawn which may be used in conjunction with the equation editor. Students are encouraged to become familiar with these features using the unassessed “Trial Exam” on LMS. DEFERRED AND SUPPLEMENTARY EXAMINATIONS Students wishing to defer any part of their assessment should submit a written application along with supporting documents. This application will only be successful if all of the other parts of the assessment have been completed.

Determination of the final grade Notation

Grade

Percentage Range

HD D C P N DNS

High Distinction Distinction Credit Pass Fail Fail

SX

Supplementary Assessment

80 – 100 70 – 79 60 – 69 50 – 59 Below 50 Did not participate in any assessments after the census date 40 – 49*

*The award of the grade of SX shall be at the discretion of the Unit Coordinator.

See in the current Assessment Policy regarding grades.

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Learning Guide Introduction Treasury Management will provide an introduction to the concept of financial risk, and the procedures and instruments used in its management. It is intended that this unit will provide a foundation for further studies in the finance and banking streams. Specifically, it should be taken before International Finance, and Derivative Securities, and is recommended to be taken before Investments, Credit and Lending Decisions, and Commercial Banking. This Learning Guide contains information on how to study each topic, including: Introductory information Learning activities/tasks Resources required for the topic How the topic contributes to the unit’s learning outcomes List of material on LMS Virtually all sessions have the same format. For convenience, all topics, readings, and required questions that students are expected to complete prior to class are summarised on the page that follows. Students are advised to print and use this “Concise Learning Guide / Study Schedule” for ready reference.

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Concise Learning Guide / Study Schedule Week

Date Commencing

TOPIC

REFERENCE Viney chapter

TUTORIAL QUESTIONS Viney discussion Viney / handout problems

1*

Sept 5

Financial System, Price Determination

1

1-1,2,6,8,9,10

2*

Sept 12

Equity Markets

4,5,6,7

4-5,6; 5-11,12; 7-14,15

6-11,12,13,14

3*

Sept 19

Debt Markets

8,9,10

9-5,6; 10-10,11

8-5; 9-7,8,12; 10-13,14

4*

Sept 26

Analysis of the Yield Curve

13

13-6,7,8

13-15; Handout 1

5*

Oct 3

Interest Rate Risk and Duration

14

14-7,11

14-8,9,10,13

6

Oct 10

Mid Term Quiz Review

7*

Oct 17

Futures – Commodity

18

18-7,8,9;19-1,2,13

Handout 2

8*

Oct 24

Futures - SPI, Interest Rate

18,19

19-3,4,7,12

19-8,9,10; Handout 3

9*

Oct 31

Forward Rate Agreements

19

18-10; 19-14

19-15; Handout 4

10*

Nov 7

Basic Options Concepts

20

18-...