Derivatives and Hedging

for Accountants

Course Description:

A derivative is a financial product that derives it 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).

Learning Objectives:

Upon successful completion of this course, participants will be able to:

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