A derivative is a financial product that derives its value based on an underlying asset, liability or other variable (such as an interest rate, foreign currency or commodity price). Derivatives have become very popular tools for “hedging” (i.e. reducing) financial risk; they have also become an increasingly standard item on big companies' balance sheets. Yet understanding how they work, what they are used for and how they can affect the bottom line of a business has proven to be a significant challenge for the accounting and auditing industries.

This course provides an “accountant-friendly” overview of financial risk management and derivative instruments. This overview focuses on the various types of risk that impact financial markets today, as well as the four major categories of derivatives commonly used to hedge these risks (i.e. forwards, futures, swaps and options).

COURSE LEARNING OBJECTIVES

After completing this course, participants should be able to:

• Define the various types of risk that impact financial markets.
• Describe the unique characteristics of forwards, futures, swaps and options.
• Recognize appropriate hedging practices using derivative instruments.

Chapter 1
Introduction to Derivatives and Hedging

After studying this chapter participants should be able to:

• Define the various types of risk that impact financial markets.
• Recognize proper financial risk management practices.
• Describe the tools used to manage financial risk.

Chapter 2
Forwards

After studying this chapter participants should be able to:

• Describe the unique characteristics of forward contracts.
• Recognize appropriate hedging practices using forward contracts.
• Calculate the payoff from a forward contract.
• Calculate forward prices and describe the effects of arbitrage on forward pricing.

Chapter 3
Futures

After studying this chapter participants should be able to:

• Describe the differences between futures and forwards.
• Explain the mechanics of futures exchanges.
• Calculate futures daily margin requirements.
• Describe the financial and operational risks associated with using futures contracts as hedging tools.

Chapter 4
Swaps

After studying this chapter participants should be able to:

• Describe the unique characteristics of swap agreements and recognize the differences between the various types of swaps.
• Calculate swap settlement amounts.
• Recognize appropriate hedging practices using swaps.

Chapter 5

After studying this chapter participants should be able to:

• Describe the unique characteristics of option contracts.
• Recognize the differences between option contracts and other types of derivative products.
• Recognize appropriate hedging practices using option contracts.
• Calculate the payoff from an option contract.

Additional Contents : Complete, no additional material needed
Advance Preparation : None
Intended Participants : Any CPA looking to maintain or enhance their professional competence
Course Declaration : Participants must complete the final examination within one year of purchase. A minimum passing grade of 70% or better is required to receive CPE
Click here to view cancellation and record retention policies