Course description

Financial Risk Management

Introduction

Risk management has become one of the most essential aspects in finance. This course focuses on managing risks in financial institutions but also for non-financial corporations. It starts with an overview of derivative markets, reviews the pricing of contingent claims and looks at the pricing of the most common derivative securities. With these fundamental tools at hand, the course then delves into measuring and managing the various types of risks faced by financial institutions, like market risk, interest rate risk and credit risk. The course also looks at financial regulation and economic capital and finishes with how risk management adds value to non-financial corporations.

Course content

Part I: Introduction and Derivatives

  1. Financial institutions and their risks
  2. Derivative markets
  3. Valuation and scenarion analysis
  4. Pricing of forwards, futures, options and swaps

Part II: Risk Management

  1. Managing market risks
  2. Asset-liability management: interest rate risk
  3. Volatility, Value-at-Risk and Expected Shortfall
  4. Methods of risk measurement
  5. Regulatory and economic capital
  6. Credit risk, default probabilities and value adjustments
  7. Corporate risk management

Learning outcome knowledge

This course will give students an understanding of the tools and practices of financial risk management.

Acquired Knowledge
The students at the end of the course are expected to know

  • The fundamentals of derivative markets
  • The use and structure of the common derivative securities
  • The various types of risks faced by financial and non-financial institutions
  • The basics and importance of financial regulation
  • The strengths and weaknesses of the various methods of quantifying and managing risks
  • The value, practices and dangers of hedging in a corporation

Exam organisation

  • Written assignment: 15%
  • Written assignment: 15%
  • Written exam: 70%