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A image to illustrate Derivatives and risk management module
In this module, you'll examine the financial and non-financial risks faced by organisations. First, you'll consider the nature of each risk and how exposure to it can be measured. This is important because management attention and risk management resources should focus on risks that are likely to arise and that are potentially costly, perhaps fatal, to organisations. You'll then study various risk management techniques used to mitigate unwanted risk exposures. These methods include 'hedging' techniques and the use of derivatives. You'll look at real cases encompassing both failures and successes in risk management across a number of organisations.
The module is divided into the following five units, and each unit comprises sessions that involve readings, discussions and other activities.
Unit 1

The module begins by introducing the various financial risks that confront organisations – credit risk, liquidity and refinancing risk, interest-rate risk, foreign exchange risk and operational risk. You'll also be introduced to the main types of derivatives instruments and the reference interest rates that are used in conjunction with them.
Unit 2

This unit studies derivatives known as forward contracts and their exchange traded equivalents, futures contracts. These contracts can be used to fix the future price at which an asset can be bought or sold. They can be used by speculators expecting the actual future price to differ from the fixed price or by hedgers, such as farmers, who want to fix the price at which they can sell their produce. Forwards and futures can be based on many different types of assets, including foreign exchange, equities, bonds and commodities.
Unit 3

This unit covers different types of options. We examine how options are valued by looking at the valuation components of intrinsic and time value and the exercise price. The analysis is somewhat technical, but you'll have an option valuation spreadsheet and software guide to assist you. In addition, a detailed explanation of the principles of option pricing is provided.
We'll also look at two other important derivatives: swaps and swaptions, to see how these are priced and how they can be used to manage risks.
Unit 4

This unit covers a number of financial risks. These include currency risk and commodity risk and how organisations can manage these; interest rate risk and how various financial instruments can be used to help manage (or hedge) this risk; liquidity and credit risk management – two key areas of risk management that have come under intense scrutiny in recent years.
You'll also explore the management of risk in bond portfolios. This includes the subject of immunisation, which is a way of managing interest rate risk arising from fixed income investments.
Unit 5

The unit starts by looking at how aggregate interest rates and other financial risks can be measured and managed by organisations. This involves understanding the concepts of gap analysis and Value-at-Risk (VaR). Other market risks – like FX risk – can also be managed by VaR.
Attention then turns to operational risk – the risk arising from the failure of systems and controls. This is not, in itself, a financial risk, but operational risk failures are commonly the root cause of losses arising from financial transactions. This unit then focuses on enterprise risk management (ERM) processes for risk management. This is a holistic approach to risk management that involves managing risks in aggregate rather than separately.
The unit and the module end by reflecting on the dangers of derivatives and some ethical issues that may arise from their use.
This module aims to enable you to:
Employment opportunities in the field of risk management have grown in recent years, partly in response to the litany of reported risk management failings. This module will be of particular interest to you if you're working, or planning to work, in an organisation in the financial sector or in the finance division of a company or public sector/not-for-profit organisation.
The subject matter of the module is, though, designed to be useful for managers and prospective managers whose immediate responsibilities are outside the domain of risk management. Given the growing catalogue of risk management failures in all sectors – and the growing emphasis being placed on effective risk management by all organisations – the content provides knowledge and skills that all effective managers should possess.
This is an optional module in the MSc in Finance which has been accepted into the CFA University Affiliation Program. This status is granted to institutions whose degree programmes incorporate at least 70% of the CFA Program Candidate Body of Knowledge (CBOK), which provide students with a solid grounding in the CBOK and positions them well to sit the exams to become CFA charter holders.
Your tutor will help you with the study material, mark and comment on your assignments and provide advice and guidance. You will contact your tutor by email, phone or via your tutor group forum on the module website.
Course work includes:
We regularly review the assessments in our modules, so we may update the examination method used for this module to an in-person exam or a remotely invigilated (proctored) exam. When we are making such a change, we will make it clear on this page. If we need to make a change after you have registered, we will notify you as soon as possible. If you have additional requirements, we will support you to complete your assessments.
You will be provided with a module book, which contains CFA readings relevant to each unit and have access to a module website with an extensive variety of specially written resources for this module. This includes:
You can only study this module as part of specific Open University qualifications.
B819 is an option module in our:
Sometimes you cannot count a module towards a qualification if you have already counted another module with similar content. To verify any excluded combinations with this module, check with an adviser before registering.
Derivatives and risk management starts once a year – in May.
This page describes the module that will start in May 2027.
We expect it to start for the last time in May 2031.
As a student of The Open University, you should be aware of the content of the academic regulations, which are available on our Student Policies and Regulations website.
All entrants must hold a BA/BSc degree awarded by a recognised university or equivalent.
Various higher education and professional qualifications are considered equivalent to a degree. If you hold a qualification that you believe is an equivalent level to a UK degree, you should contact us. The Open University Business School Masters Programme Committee is responsible for judging whether applicants' qualifications meet the requirements for admission.
You will also need an appropriate facility in English language, sufficient to be able to work effectively at postgraduate level; generally, this means capability equivalent to an International English Language Test System (IELTS) score of 6.5. To assess your English language skills in relation to your proposed studies you can visit the IELTS website. If you think either of these possibilities may apply to you, please speak to an adviser.
It is strongly recommended that you are comfortable with the use of numerical methods and use of spreadsheets. If you are unsure about these skills, we suggest you familiarise yourself with illustrative numerical skills and methods prior to studying.
If you have any doubt about the suitability of the course, please contact us.
No preparatory work is required, although you may want to assess your maths skills using the diagnostic quiz for the MSc in Finance if you have not already done so prior to your earlier studies.
This module is delivered online, and time spent using a computer and the internet will therefore be extensive. Some online material may not be available or fully accessible using a screen reader (mathematical and scientific materials may be particularly difficult to read in this way).
If you’re using printed materials as part of reasonable adjustments to support your studies, note that printed versions of online materials are unavailable for this module.
StartEndRegister byEngland fee
01 May 202731 Oct 202715 Apr 2027£2,075
If you study this module as part of an eligible qualification, you can apply for a postgraduate loan to support your study costs. To find out more, see Postgraduate loans in England.
Studying with The Open University can boost your employability. OU courses are recognised and respected by employers for their excellence and the commitment they take to complete. They also value the skills that students learn and can apply in the workplace.
Over 30,000 employers have used the OU to develop staff so far. If the module you’ve chosen is geared towards your job or developing your career, you could approach your employer to see if they will sponsor you by paying some or all of the fees.
You can pay part or all of your tuition fees upfront with a debit or credit card when you register for each module.
We accept American Express, Mastercard, Visa and Visa Electron.
Please note: your permanent address/domicile will affect your fee status and, therefore, the fees you are charged and any financial support available to you. The fee information provided here is valid for modules starting before 31 July 2027. Fees typically increase annually. For further information about the University's fee policy, visit our Fee Rules.
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