Corporate and Financial Risk Management

Introduction

The objective of this course is to provide students with an understanding of corporate and financial risk management. The course explores questions such as: why corporations should manage risks, how to measure risks, and what tools firms may use to do so. The focus of the course is not on derivatives per se, but on a basic understanding and intuition of derivatives markets, their instruments and participants. The course has a theoretical background but will generally focus on applications.

During this course we will learn the principles behind risk management and how derivative instruments can be used to change the risk profile of a corporation or simply a financial position. The course begins by exploring why firms should manage risks. We will then cover the pricing/valuation and trading of derivatives instruments commonly used in risk management as well as the markets in which they trade. The remainder of the course will focus on practical applications of these derivatives for hedging decisions, how to properly measure risk exposure, and the different types of risks firms face. We will also discuss how climate risk can translate to financial risk through micro and macroeconomics channels and potential mitigants to these risks.

Course content

1. Why manage risk?
2. Derivative markets
3. Real options and operating flexibility
4. Financial Crises and Regulation
5. Other Topics in Risk Management