GRA 6513 Financial Risk Management
GRA 6513 Financial Risk Management
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.
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
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
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.
Part I: Introduction and Derivatives
- Financial institutions and their risks
- Derivative markets
- Valuation and scenarion analysis
- Pricing of forwards, futures, options and swaps
Part II: Risk Management
- Managing market risks
- Asset-liability management: interest rate risk
- Volatility, Value-at-Risk and Expected Shortfall
- Methods of risk measurement
- Regulatory and economic capital
- Credit risk, default probabilities and value adjustments
- Corporate risk management
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.
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.
| Assessments |
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Exam category: Submission Form of assessment: Written submission Weight: 15 Grouping: Group (2 - 4) Duration: 1 Week(s) Exam code: GRA65131 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Weight: 15 Grouping: Group (2 - 4) Duration: 1 Week(s) Comment: Assignment Group size may vary due to class size and other considerations. Exam code: GRA65131 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Weight: 10 Grouping: Group (2 - 4) Duration: 1 Week(s) Comment: Assignment Group size may vary due to class size and other considerations. Exam code: GRA65131 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 60 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Final written examination under supervision. Exam code: GRA65131 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
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.
Group size may vary due to class size and other considerations.