Financial Risk Management
- This course will provide students with a comprehensive overview of the main types of risk that have such a substantial impact on international firms and financial institutions.
- Know basic functions of financial risk management.
- Forecast the financial risks that financial institutions and corporations could face in the international market.
- Measure the risks that arise from financial markets - such as credit risk, market risk, liquidity risk and sovereign risk.
- Classify derivative instruments that could be used in managing the risks of financial institutions and international corporations.
- Introduction to Financial Risk ManagementThe concept of financial markets. Sources of financial risk. Diversification. Risk Management process. Factors that impact financial rates and prices.
- Interest Rate RiskThe repricing model. Rate-Sensitive Assets and Rate-Sensitive Liabilities. Spread effect. The term structure of interest rates. Unbiased Expectations Theory. Liquidity Premium Theory. Forecasting Interest Rates.
- Credit Default RiskCommercial and Industrial Loans. Real Estate Loans. Individual (Consumer) Loans. The Contractually Promised Return on a Loan. The Expected Return on a Loan.
- Foreign Exchange RiskThe concept of foreign currency and foreign exchange markets. The importance and the actors in the foreign exchange market. Proper cross rates currencies. Improper cross rates currencies.
- Sovereign RiskDebt Repudiation Versus Debt Rescheduling. Country Risk Evaluation. Variance of Export Revenue (VAREX). Using Market Data to Measure Risk: The Secondary Market for LDC and Emerging Market Debt.
- Off-Balance-Sheet Risk and Liquidity RiskOff-Balance-Sheet Activities and Fi Solvency. Returns and Risks of Off-Balance-Sheet Activities. Loan Commitments. Commercial Letters of Credit and Standby Letters of Credit.
- Managing RiskCredit Risk Management. Calculating the Return on a Loan. Comparison of Hedging Methods.
- Assignment test*The structure may be slightly altered if a tutor finds it necessary.
- Case project* The number of students in a team depends on the number of students in a seminar group. This requirement is to be determined after the course starts. Forming of teams is each student's responsibility. Being unable to work in a team as required may be a reason to fail the assignment. The list of team members must be sent to the tutor one week before the presentation. Any changes in teams made after the deadline must be validated by a serious reason.
- Final examinationThe results are announced within 5 days after the deadline. Shortly after the result are announced, a lecturer organises a meeting online to comment on the results. Each student may request comments on their results during the meeting, the attendance is not obligatory. Upon the students' request, lecturer may organise another meeting before the exam to provide some clarification on the assignment.
- Interim assessment (1 module)0.25 * Assignment test + 0.25 * Case project + 0.5 * Final examination
- Financial institutions management: a risk management approach, Saunders, A., Cornett, M., 2005
- Tarantino, A., & Cernauskas, D. (2011). Essentials of Risk Management in Finance. Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=352036