CLASS OUTLINE 40361

DEPARTMENT OF ACCOUNTING AND FINANCE

TREASURY MANAGEMENT
CLASS CODE: 40361
2009/10 SEMESTER 2
LECTURER
Name: Professor ANDREW MARSHALL, Dept. of Accounting and Finance
Room: Curran Building Level 3 room number 3.61
Telephone: 041-552-4400 EXT. 3894
E-Mail a.marshall@strath.ac.uk

Do not hesitate to contact me if you have any problems with the lectures or tutorials. I
have a timetable when I am available during the week. If for some reason you need to
contact me urgently and I am not there contact the secretaries, telephone or E-mail
me.

CLASS DESCRIPTION

This class provides an introduction to the role of a corporate treasurer in a

multinational company and their main task of managing risk.

CLASS AIMS

The purpose of this class is to provide a rigorous introduction to the activities of

treasury managers. We cover the development of the profession, the organisational
aspects of treasury, and the four main functional areas of treasury: foreign exchange,
liquidity, funding, and the banking relationship. A significant emphasis will be placed
on practical techniques and the solution of problems, though not to the exclusion of
some theory.

Please contact Susan Jackson in the departmental1 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

LEARNING OUTCOMES
The following learning outcomes will contribute to your self-analysis and reflection in
your Student’s Personal Development Planning (SPDP). These learning outcomes
will be assessed using the methods explained in the “Assessment” section in this
Outline.
Subject-specific knowledge and skills
ubject-specific knowledge and skills
On completing the course you will be able to understand and explain:

A.1. • the day to day activities of a company treasurer.

A.2. • the role of a corporate treasurer in a large UK company.
A.3. • the functions of the treasurer and solve simple treasury problems.
A.4. • the financial risks facing large multinational companies.
A.5. • the hedging instruments and assess their suitability in relation to the risks
identified.

Cognitive abilities and non-subject specific skills

During the course you will develop

B.1. competence in interpreting and evaluating financial problems posed both in

quantitative and non-quantitative terms.

B.2. practical risk management problems using a case study approach.

B.3. ability to connect academic theories to the practice of risk management

B.4. team work and communication skills will also be developed in the assignment
project

B.5. information technology skills in use of the class web-sites and links, word-
processing and spreadsheet skills in tutorial preparation and in assessed projects.

B.6. understand the language and observe the practice of treasury management
industry by reading professional treasury journals.

ASSESSMENT

Assessment is based on a class examination in the Summer (May 2010) diet of exams.
The exam will require the student to answer three questions, one from each of three
sections. It will follow the same format as the 2008 exam. The exam will count for
60% of your final mark.
A class exam will be held in during the term, counting for 20% of your final mark. A
group case study will be required for the end of week 12 (May 2010). This case study
will be assigned in week 9 and will count for 20% of your final mark.
Satisfactory attendance and participation in workshops is required to gain the credits
for this course.

Please contact Susan Jackson in the departmental2 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

ALL WORK MUST BE SUBMITTED TO QUALIFY FOR THE CLASS

CREDITS.

The nature of the project and examinations will be announced in class. The assessment
methods are intended to achieve the learning outcomes for the class. Details of the
marking scheme will be provided in class.

Reassessment

If you do not pass the course at the first attempt, or cannot sit the exam for medical or
personal reasons, you will we required to take a re-sit examination. Your final
assessment will now be based entirely on your mark on the re-sit exam.

TEACHING AND LEARNING

Students are introduced to the main themes and topics in the lectures. These are
reinforced, extended and developed through the discussion of prepared questions in
tutorials. These questions are intended to check your understanding of the lecture
content and your ability to explain the key concepts involved. This will prepare you
for the modes of Assessment (explained below). Active participation in tutorials is
important and this will be encouraged by tutors to the extent of occasionally requiring
short presentations by students. At all times students are expected to supplement their
learning by reading the prescribed textbook(s) and newspaper or web articles.

Lectures
There will be twelve 2 hour lectures at the following time:
Friday 10am - 12am

Workshops

Although the basic themes and are introduced in the lectures, students are expected to
develop these ideas through discussion and preparation of questions in tutorials.

Workshops will begin in Week 3.

Due to the comprehensive nature of the course students will be asked to read a
number of journal and professional articles for their tutorials.

Treasury Risk Management

PWC will be sponsoring a prize for the best three overall students in Treasury
Management. Also staff from the risk management department will be participating in
tutorials and lectures.

Please contact Susan Jackson in the departmental3 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

The Association of Corporate Treasurers will sponsor a prize for the best project in
the treasury management.

PRE-REQUISITES

Students should have taken Accounting 3/ Finance 3.

Links

Treasury management builds on the basic principles and theories of finance outlined
in the first and second years by considering practical problems faced by company
treasurers in managing risk. Students are introduced to derivatives and their use for
hedging which has clear links with Finance V.

READING
References
The textbook for this class is.
An Introduction to Derivatives and
Risk Management, 7th Edition
Don M. Chance | Robert Brooks
ISBN-10: 0324321392

I will provide students with material in each lecture and specific references to each
topic will be given at the top of each section. I strongly recommend that you read
these prescribed references.
Some of the journal articles and professional articles will be available for you. A
number of general finance text books will cover various parts of the course including
the major finance text books like Ross, Westerfield and Jaffe and Brealey and Myres
and these should be consulted wherever necessary. There are number of professional
treasury management journals, such as The Treasurer, which are very useful to give
students an insight into the practical treasury function.

LECTURE PROGRAMME

Outline Course Content

Detailed References given at each lecture
LECTURE
1. General Background, Administration of Course.
• What is a company treasurer?.
• The role of a treasurer in different organisations.
• The development of treasury as a profession.
• Risk Management - What is it?

Please contact Susan Jackson in the departmental4 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

2. Risk Management
• Treasury Systems - Information
• Identification
• Measurement
• Outcome Desired
• Forecasting/Hedging
• Hedging v. Speculating
• Introduction to Strategic Risks

3. Interest Rate Risk: Measurement And Management I

• Identification and Types of interest rate risk - Gap, Basis and Specific
• The measurement of interest rate risk - Gap Exposure and Duration
• Forecasting Interest Rate - Yield Curves
• History of UK interest rate movements and effect on companies
• Framework for the management of short-term and long term interest rate risk

4. Interest Rate Risk: Measurement And Management II

• Interest rate risk management instruments
• Interest Rate Forwards
• Financial futures

5. Interest Rate Risk: Measurement And Management III

• Options on interest rates
• Caps, floors and collars
• Interest rate swaps
• Case Study on Interest Rate Risk

6. Foreign Exchange Risk Measurement and Management I

• Introduction to the foreign exchange markets
• Spot Rates and the forward market
• The forward market and technical relationships to the spot market - Interest Rate and
Purchasing Power Parity

7. Foreign Exchange Risk Measurement and Management II

• The management of specific currency risks
• Transaction exposure
• Translation exposure
• Economic exposure
• Internal versus External Hedging

8. Foreign Exchange Risk Measurement and Management III

• Internal Hedging Methods
• Specific external instruments used to manage currency risk
• Foreign exchange transactions
• Currency forwards
Please contact Susan Jackson in the departmental5 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

9. Foreign Exchange Risk Measurement and Management IV

• Currency options contracts
• Currency swaps
• Case Study on Currency Risk

10. Working Capital Management

• Cash cycle management
• Cash forecasting
• Liquidity management
• Working Capital Models

11. Short Term Investing and Funding Decisions

• Investment principles
• Borrowing principles
• Simultaneous investing and borrowing
• Size and structure of domestic (UK) markets
• Short Term Funding Instruments
• Short Term Investment Instruments

12. Class Review

Please contact Susan Jackson in the departmental6 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

Semester Plan for Treasury Management

NOTE: THE
THIS MEANS YOU MUST SUBMIT WORK IN THIS WEEK

Week 3 – Tutorial 1
Overview of risk and growth of treasury
Organisation of Treasury - Profit centre versus costs centre - Discussion

Week 4 – Tutorial 2
Interest rate risk
Organisation of Treasury - Profit centre versus cost centre –
Discussion/Presentation by students.

Week 5 – Tutorial 3
Essay on ways to measure interest rate risk
Discussion of individual project.

Week 6 – Tutorial 4
Computational questions on interest rate risk hedging
Organisation of Treasury – Centralised versus Decentralised –
Discussion/Presentation by students

Week 7 – Tutorial 5
Computational questions on interest rate risk
CLASS EXAM

Week 8 – Tutorial 6

Discussion of currency hedging.

Tutorials will continue as normal.

Week 9 – Tutorial 7
Discussion of currency risk hedging instruments
Organisation of Treasury - Banking Relationships – Discussion/Presentation by
students.

Week 10 – Tutorial 8
Computational questions on currency risk hedging
Submission of Tutorial Work

Week 11
No tutorial, tutorial times should be used for group discussions.
However, computational questions on currency risk management will be circulated
for this week.
Tutor and/or lecturer will be available at tutorial times for discussion of project.

Week 12 – Tutorial 9
Computational questions on short term funding and borrowing
Group project submission

Please contact Susan Jackson in the departmental7 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.

Organisation of Treasury – Credit relationships – Discussion/ Presentation by
students.
TEXTBOOK REFERENCES FOR TREASURY MANAGEMENT
Lecture handouts 1 and 2 Introduction to
treasury management and financial risk
management
Lecture handout 3, 4 and 5 Interest rate
risk, FRA, Futures, Interest Rate Options
and interest rate swaps
Lecture handout 8 external methods for
managing currency risk
Please contact Susan Jackson in the departmental8
alternative formats of teaching materials are required or if you need any other assistance.
CLASS OUTLINE 40361
Chance chapter 1 Introduction to
derivative markets
Chance chapter 16 Financial Risk
Management (ignore delta, gamma and
vega hedging)
Chance chapter 2 the structure of the
option market (covers all types of options
including interest rate and currency
options)
Chance chapter 7 structure of forward
and future market (covers both interest
rates and currency)
Chance chapter 10 - short term interest
rate hedging
Chance chapter 11 – short term interest
rate futures strategy.
Chance chapter 14 – interest rate options
Chance chapter 14 – FRA
Chance chapter 14 – interest rate swaps
Chance chapter 2 the structure of the
option market (covers all types of options
including interest rate and currency
options)
Chance chapter 7 structure of forward
and future market (covers both interest
rates and currency)
Chance 13 (ignore pricing foreign
currency derivatives)
office of Accounting and Finance if
 CLASS OUTLINE 40361

UNIVERSAL MARKING GUIDE (ASSESSMENT DESCRIPTOR) 2009/2010

% Descriptor

80 – 100 Outstanding demonstration of learning outcomes:

• wide, appropriate knowledge and understanding (and where appropriate
effective project work) including insight and originality
• evidence of reading and thought beyond course/assignment materials
• appropriate use of references and exemplars
• an outstanding standard of writing and communication and/or presentation

70 – 79 Excellent demonstration of learning outcomes:

• wide, appropriate knowledge and understanding (and where appropriate
effective project work) including insight or originality
• evidence of reading and thought beyond course/assignment materials
• appropriate use of references and exemplars
• an excellent standard of writing and communication and/or presentation

60 – 69 Comprehensive demonstration of learning outcomes:

• wide appropriate knowledge and understanding (and where appropriate
effective project work) with only occasional lapses in detail
• evidence of reading and thought beyond course/assignment materials
• a high standard of writing and communication

50 – 59 Satisfactory demonstration of learning outcomes:

• sound knowledge and understanding of essential material (and where
appropriate essential project skills)
• general accuracy with occasional mistakes and/or uncoordinated use of
information

40 – 49 Adequate demonstration of learning outcomes:

• basic knowledge and understanding (and where appropriate basic project
skills)
• omissions and/or weaknesses of presentation and/or logic and/or evidence

30 – 39 Limited demonstration of learning outcomes:

• some relevant information and limited understanding (and where appropriate
some project work completed under supervision)
• omissions and/or weaknesses of presentation and/or logic and/or evidence
• lack of familiarity with the subject of assessment and/or assessment vehicle

20 – 29 Inadequate demonstration of learning outcomes:

• a few key words, phrases or key ideas
• extensive omissions and/or weaknesses of presentation and/or logic and/or
evidence
• serious errors
• inadequate evidence of learning or inadequate project work

1 – 19 Weak performance in learning outcomes

• serious errors
• extensive omissions and/or weaknesses of presentation and/or logic and/or
evidence
• deficient evidence of learning or deficient evidence of project work

0 No relevant work submitted for assessment

Please contact Susan Jackson in the departmental9 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.
 CLASS OUTLINE 40361

Please contact Susan Jackson in the departmental

10 office of Accounting and Finance if
alternative formats of teaching materials are required or if you need any other assistance.