GRA 6513 Financial Risk Management

GRA 6513 Financial Risk Management

Course code: 
GRA 6513
Department: 
Finance
Credits: 
6
Course coordinator: 
Adam Walter Winegar
Course name in Norwegian: 
Financial Risk Management
Product category: 
Master
Portfolio: 
MSc in Finance
Semester: 
2019 Spring
Active status: 
Active
Level of study: 
Master
Teaching language: 
English
Course type: 
One semester
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.

Learning outcomes - 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
Learning outcomes - Skills

The students at the end of the course are expected to be able to

  • Price plain vanilla forwards, futures, options and swaps with standard methods
  • Manage linear and non-linear exposures using static and dynamic strategies
  • Perform asset-liability management for financial institutions
  • Estimate Value-at-Risk and Expected shortfall using historical simulations, Monte Carlo simulations and the variance-covariance method
  • Estimate default probabilities using structural and reduced-form approaches
Learning Outcome - Reflection

The student should reflect principally on how to approach risk management in the various financial and non-financial corporations in view of the available instruments and the strengths and limitations of the available tools and practices. Even though several technical tools are available, risk management requires a pragmatic approach to ensure that, on the one hand, no large risks are overlooked and, on the other hand, the profitability of an enterprise is not undermined unnecessarily.

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 process and requirements to students

Lectures. (Class participation and problem solving is essential.)

Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class that is not included on it's learning or text book.

This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course start.

At resit, all exam components must, as a main rule, be retaken during next scheduled course.

Software tools
Matlab
Qualifications

All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.

Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65131
Grading scale:
Point scale
Grading rules:
Internal examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
15No 1 Week(s)Group ( 2 - 4)Assignment Group size may vary due to class size and other considerations.
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65131
Grading scale:
Point scale
Grading rules:
Internal examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
15No1 Week(s)Group ( 2 - 4)Assignment Group size may vary due to class size and other considerations.
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65131
Grading scale:
Point scale
Grading rules:
Internal examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
10No1 Week(s)Group ( 2 - 4)Assignment Group size may vary due to class size and other considerations.
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65131
Grading scale:
Point scale
Grading rules:
Internal and external examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
60Yes3 Hour(s)
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Individual Final written examination under supervision.
Exams:
Exam category:Submission
Form of assessment:Written submission
Weight:15
Invigilation:No
Grouping (size):Group (2-4)
Support materials:
Duration: 1 Week(s)
Comment:Assignment Group size may vary due to class size and other considerations.
Exam code: GRA65131
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam category:Submission
Form of assessment:Written submission
Weight:15
Invigilation:No
Grouping (size):Group (2-4)
Support materials:
Duration:1 Week(s)
Comment:Assignment Group size may vary due to class size and other considerations.
Exam code: GRA65131
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam category:Submission
Form of assessment:Written submission
Weight:10
Invigilation:No
Grouping (size):Group (2-4)
Support materials:
Duration:1 Week(s)
Comment:Assignment Group size may vary due to class size and other considerations.
Exam code: GRA65131
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam category:Submission
Form of assessment:Written submission
Weight:60
Invigilation:Yes
Grouping (size):Individual
Support materials:
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Duration:3 Hour(s)
Comment:Final written examination under supervision.
Exam code: GRA65131
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam organisation: 
Continuous assessment
Grading scale: 
ECTS
Total weight: 
100
Sum workload: 
0

A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.