Financial Risk Management

Introduction

Risk management has become one of the most essential aspects in finance especially in light of recent international financial crises. It is now considered a core area for any modern sustainable business. In order to understand how to manage risks in global context, it is key that students learn to critically think about risk management and its implementation. This requires students have the requisite knowledge of risk management theory and tools, as well as the skills to apply these theories and tools in today's modern digital business environment

The course starts with an overview of how risk management adds value. It then covers the valuation of derivatives and the markets in which they trade, including the valuation of the most common derivative securities (e.g., forwards, swaps, and options). With the the knowledge of these fundamental tools, the course then delves into measuring and managing the various types of risks faced by financial institutions, including market, credit/countparty, and liqudity risks. Emphasis is placed on building models using statistical tools and software packages (e.g. Python or R) and applying them to real world cases. Throughout the course, students will explore financial crises and failures of major financial institutions as well changing financial regulations. Students will utilize these examples as way to learn from the past to create more sustainable financial institutions in the future.

Course content

Part I: Introduction and Derivatives

1. How risk management adds value
2. Pricing of forwards, futures, options and swaps
3. Derivative markets

Part II: Risk Management

1. Managing market risks
2. Volatility, Value-at-Risk, and Expected Shortfall
3. Methods of risk measurement
4. Financial Crises and Regulations
5. Credit risk, default probabilities and value adjustments
6. Liquidity Risks
7. Corporate risk management