Derivatives and Hedging for Accountants

6 Credits: Finance


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Derivatives and Hedging for Accountants

Course Level
CPE Credits

6 Credits: Finance

Course Description

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 derivatives and hedging 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).

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Learning Objectives

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

Chapter 1

  • Recognize the various types of risk that impact financial markets, noting defining characteristics and examples
  • Identify proper financial risk management practices
  • Cite examples of tools used to manage financial risk, noting the basic types of derivative instruments and their usage

Chapter 2

  • Cite examples of forward contracts, noting their unique characteristics
  • Identify appropriate hedging practices using forward contracts
  • Calculate the payoff from a forward contract
  • Calculate forward prices, noting the effects of arbitrage on forward pricing

Chapter 3

  • Identify a futures contract, noting the difference between a futures contract and a forwards contract and the risks associated with each
  • Cite the mechanics of futures exchanges, noting applicable terminology and examples of futures orders
  • Calculate futures daily margin requirements
  • Identify the financial and operational risks associated with using futures contracts as hedging tools

Chapter 4

  • Identify the various types of swap agreements, noting the unique characteristics and mechanics of each
  • Calculate swap settlement amounts
  • Identify appropriate hedging practices using swaps

Chapter 5

  • Cite examples of option contracts, noting defining characteristics and key differences with other derivative products
  • Identify appropriate hedging practices using option contracts
  • Calculate the payoff from an option contract
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Course Specifics

Course ID
Revision Date
September 7, 2022

There are no prerequisites.

Advanced Preparation


Number of Pages

Compliance Information

NASBA Provider Number: 103220

CMA Notice: Western CPE makes every attempt to maintain our CMA CPE library, to ensure a course meets your continuing education requirements please visit Insitute of Management Accountants (IMA)

CFP Notice: Not all courses that qualify for CFP® credit are registered by Western CPE. If a course does not have a CFP registration number in the compliance section, the continuing education will need to be individually reported with the CFP Board. For more information on the reporting process, required documentation, processing fee, etc., contact the CFP Board. CFP Professionals must take each course in it’s entirety, the CFP Board DOES NOT accept partial credits for courses.

Meet The Experts

Michael J. Walker Headshot

Michael J. Walker, CPA, is based in New England and has decades of accounting experience in the financial services, information technology services, and construction industries. He has an extensive technical accounting background that includes hands-on experience with U.S. GAAP and International Financial Reporting Standards (IFRS). His expertise includes accounting for financial instruments, securitizations, and other banking products. He graduated from Bentley University with a BS in finance and an MS in accountancy.