Financial Risk Management
- The course is aimed at the understanding of main functions of financial risk management and its role in the system of a corporate management. It also provides students with tools and methods of financial risks assessment and mitigation.
- Students understand the principles of financial risk management
- Students know basic functions of financial risk management
- Students are able to calculate cost of credit risk
- Students are able to calculate cost of currency risk
- Students know tools of financial engineering and risk hedging
- Students understand principles of non-profit organizations financial risk management
- Fundamentals of financial risk managementThis is introductory part where students learn fundaments of financial risk and how to manage them: Introduction to financial risk management; The Conflict of Risk and Reward; Typology of risk exposures
- Risk and returns on financial marketsIn this part, we derive predictions for expected return as a function of risk. We begin with an examination of various conventions for measuring and reporting rates of return. Students compute various measures of return on multi-year investments. We use data on the past performance of stocks and bonds or scenario analysis to characterize the risk and return features. The expected return and risk of portfolios are constructed by combining risky assets with risk-free investments in government bonds.
- Investment portfolio and market riskIn this chapter we evaluate the performance of a portfolio manager accounting for market risk. Adjusting average returns for risk presents a host of issues because the proper measure of risk may not be obvious and risk levels may change along with portfolio composition. We begin with conventional approaches to risk adjustment. These use the risk measures developed earlier to rank investment results.
- Interest rate riskIn this part, we calculate how bond prices will change over time for a given interest rate projection. The call, convertibility and sinking fund provisions, are described and analyzed how these provisions affect a bond’s price and yield to maturity.
- Analysis and assessment of default riskIn this part are identified and analyzed the determinants of bond safety and rating and how default risk is reflected in bond yields and the prices of credit default swaps.
- The foreign exchange market and currency riskIn this part we analyze foreign exchange market and learn how to hedge currency risk. We formulate hedge strategies to offset the currency risk involved in international investments.
- Global risks and the risk of countryIn this part are introduced global, political and country-specific risks that must be considered in the overall risk assessment. Also, students learn how performance attribution procedures can be adapted to an international setting.
- Homework projects
- Students’ activities at class
- Written assignment
- ExamThe exam for the "Financial Risk Management" will be held in distant format, asynchronously. In LMS students may find a case study (project) questions uploaded on 29.05. Students have more than 3 weeks to write case study (open book) and send to the professor until 22.06. On 25.06. the professor will submit the grades in LMS. During the writing period of case study, students can consult the professor by Skype, email or LMS. All conditions and explanations are in LMS.
- Interim assessment (4 module)0.5 * Exam + 0.225 * Homework projects + 0.05 * Students’ activities at class + 0.225 * Written assignment
- Crouhy, M., Galai, D., & Mark, R. (2006). The Essentials of Risk Management. New York: McGraw-Hill Professional. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=165272
- Población García, F. J. (2017). Financial Risk Management : Identification, Measurement and Management. Cham: Palgrave Macmillan. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1292890
- Christoffersen, P. F. (2003). Elements of Financial Risk Management. Amsterdam: Academic Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=104701