GRA 6545 Risk Management
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APPLIES TO ACADEMIC YEAR 2016/2017 |
GRA 6545 Risk Management
Responsible for the course
Costas Xiouros
Department
Department of Finance
Term
According to study plan
ECTS Credits
6
Language of instruction
English
Introduction
This course provides an introduction to derivatives and risk management for non-financial firms.
Learning outcome
This course will give students an understanding of corporate risk management: why corporations should hedge and what tools they may use to do so. The course will give an overview of the pricing and use of derivatives for risk management, as well as insights into the corporate hedging decision. The course will contain both theory and examples/cases of risk management applications.
Prerequisites
GRA 6540 Applied Finance or equivalent
GRA 6543 Introduction to Asset Pricing or equivalent
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 spesific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.
Compulsory reading
Books:
McDonald, Robert L. 2014. Derivatives markets. 3rd ed., New international ed. Pearson Education
Collection of articles:
Supplementary readings
Other:
During the course there may be hand-outs and other material on additional topics relevant for the course and the examination.
Recommended reading
Books:
Hull, John C. 2015. Options, futures, and other derivatives. 9th ed. Pearson
Stulz, René M.. 2002. Risk Management & Derivatives. Thomson South-Western
Course outline
(Details may vary from year to year)
1. Overview of derivatives markets and corporate financial risks
2. Measures of risk: value-at-risk and cash-flow -at -risk
3. Estimating value or cash-flow at-risk with simulation analysis
4. Hedging with forwards, futures, options
5. Pricing of forwards, futures, options
6. Binominal pricing and the Black-Scholes model
7. Motives for hedging: when should firms hedge?
8. Case study(ies)
Computer-based tools
Learning process and workload
A course of 6 ECTS credits corresponds to a workload of 160-180 hours.
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 the course homepage/It's learning or text book.
Examination
The course grade will be based on the following activities and weights:
30% Assignments (group and/or individual)
Final written 3-hour exam accounts for 70% of the grade.
| Form of assessment | Weight | Group size |
| Assignment | 30% | |
| Written examination 3 hours | 70% | Individual |
Specific information regarding student assessment will be provided in class. This information may be relevant to requirements for term papers or other hand-ins, and/or where class participation can be one of several components of the overall assessment. This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded using points on a scale from 0-100. The final grade for the course is based on the aggregated mark of the course components. Each component is weighted as detailed in the course description. Students who fail to participate in one/some/all exam components will get a lower grade or may fail the course. You will find detailed information about the points system and the mapping scale in the student portal @bi. Candidates may be called in for an oral hearing as a verification/control of written assignments.
Examination code(s)
GRA 65451 continuous assessment accounts for 100% of the final grade in the course GRA 6545.
Examination support materials
BI approved exam calculator
Bilingual dictionary
Interest tables
Permitted examination support materials for written examinations are detailed under examination information in the student portal @bi. The section on support materials and the use of calculators and dictionaries should be paid special attention to.
Re-sit examination
It is only possible to retake an examination when the course is next taught. The assessment in some courses is based on more than one exam code. Where this is the case, you may retake only the assessed components of one of these exam codes. All retaken examinations will incur an additional fee. Please note that you need to retake the latest version of the course with updated course literature and assessment. Please make sure that you have familiarised yourself with the latest course description.
Additional information
Honour code. Academic honesty and trust are important to all of us as individuals, and are values that are integral to BI's honour code system. Students are responsible for familiarising themselves with the honour code system, to which the faculty is deeply committed. Any violation of the honour code will be dealt with in accordance with BI’s procedures for academic misconduct. Issues of academic integrity are taken seriously by everyone associated with the programmes at BI and are at the heart of the honour code. If you have any questions about your responsibilities under the honour code, please ask. The learning platform itslearning is used in the teaching of all courses at BI. All students are expected to make use of itslearning.