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Regular version of the site

Financial Risk Management

2021/2022
Academic Year
ENG
Instruction in English
4
ECTS credits
Course type:
Compulsory course
When:
4 year, 1 module

Instructors

Course Syllabus

Abstract

The course consists of lectures (12 hours) and tutorials (28 hours). The tutorials involve case analysis, problem solving and the individual assignments. The course presents an advanced treatment of the theory and its application to financial institutions and international corporations. This course consists of seven units, which will enrich knowledge with an invaluable grounding in the subject and enable students to acquire a strong theoretical and practical understanding of the current and essential risk management practices.
Learning Objectives

Learning Objectives

  • 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.
Expected Learning Outcomes

Expected Learning Outcomes

  • 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.
Course Contents

Course Contents

  • Introduction to Financial Risk Management
    The concept of financial markets. Sources of financial risk. Diversification. Risk Management process. Factors that impact financial rates and prices.
  • Interest Rate Risk
    The 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 Risk
    Commercial and Industrial Loans. Real Estate Loans. Individual (Consumer) Loans. The Contractually Promised Return on a Loan. The Expected Return on a Loan.
  • Foreign Exchange Risk
    The 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 Risk
    Debt 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 Risk
    Off-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 Risk
    Credit Risk Management. Calculating the Return on a Loan. Comparison of Hedging Methods.
Assessment Elements

Assessment Elements

  • non-blocking Assignment test
    *The structure may be slightly altered if a tutor finds it necessary.
  • non-blocking 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.
  • non-blocking Final examination
    The 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

Interim Assessment

  • Interim assessment (1 module)
    0.25 * Assignment test + 0.25 * Case project + 0.5 * Final examination
Bibliography

Bibliography

Recommended Core Bibliography

  • Financial institutions management: a risk management approach, Saunders, A., Cornett, M., 2005

Recommended Additional Bibliography

  • 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