EXC 3673 Corporate and Financial Risk Management
EXC 3673 Corporate and Financial Risk Management
The objective of this course is to provide students with an understanding of corporate and financial risk management. The course explores questions such as: why corporations should manage risks, how to measure risks, and what tools firms may use to do so. The focus of the course is not on derivatives per se, but on a basic understanding and intuition of derivatives markets, their instruments and participants. The course has a theoretical background but will generally focus on applications.
During this course we will learn the principles behind risk management and how derivative instruments can be used to change the risk profile of a corporation or simply a financial position. The course begins by exploring why firms should manage risks. We will then cover the pricing/valuation and trading of derivatives instruments commonly used in risk management as well as the markets in which they trade. The remainder of the course will focus on practical applications of these derivatives for hedging decisions, how to properly measure risk exposure, and the different types of risks firms face. We will also discuss how climate risk can translate to financial risk through micro and macroeconomics channels and potential mitigants to these risks.
The students will acquire a good understanding of derivatives, risk measurement, and risk management. More specifically the students will develop their understanding with respect to the following topics:
- The value-adding principles behind risk management and the ability to evaluate risk-management practices.
- The structure and specifics of the basic derivative securities, including their valuation and trading.
- The economic role of derivative securities and the way they are being and can be used in practice.
- How to identify the factors to which a firm or a financial position is exposed and the ways to measure risk.
- The current trends and strategies for companies to reduce climate risk and manifest climate-related opportunities.
During the acquisition of the above-mentioned knowledge the students will acquire the following skills:
- Calculate various measures of the risks of a corporation or a financial position.
- Value basic derivative tools using no-arbitrage-based methods.
- Construct and evaluate various strategies using derivatives.
- Identify risk factors that firms face, implement hedging strategies using derivatives, and represent the resulting payoffs both diagrammatically and mathematically.
- The acquired theoretical and practical knowledge provided by the course should enable the student to first understand and be able to apply the basic principles behind the pricing and hedging of derivative instruments especially from the point of view of risk management. Further the student should acquire the ability to appreciate the financial and economic opportunities that derivative instruments offer while also being able to critically assess their role and practical value in light of how these products are being used.
- Why manage risk?
- Derivative markets
- Real options and operating flexibility
- Financial Crises and Regulation
- Other Topics in Risk Management
The course will include a combination of lectures and plenary tutorials where solutions to exercises will be explained and practical examples will be presented. Several exercises and practice questions will be uploaded on the course website on itslearning in addition to practice exams.
Specific information regarding any aspect of the course or student evaluation will be provided in class. Please note that whilst attendance is not compulsory, it is the student’s responsibility to obtain any information provided in class that is not included on the course website on itslearning or in the textbook. The course website on itslearning is not designed for the purpose of students who choose not to attend class.
Spreadsheets (Excel) will be used for certain practical applications and examples. It is recommended that students are familiar with their use.
Python or R would be helpful for understanding some aspects of the course.
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.
Higher Education Entrance Qualification
Disclaimer
Deviations in teaching and exams may occur if external conditions or unforeseen events call for this
EXC 3671 Corporate Finance, EXC 3612 Investment Analysis, EXC 3672 Analyses of Financial Data, EXC 3670 Financial Markets and Institutions, or equivalent.
| Assessments |
|---|
Exam category: School Exam Form of assessment: Written School Exam - pen and paper Exam/hand-in semester: First Semester Weight: 30 Grouping: Individual Support materials:
Duration: 1 Hour(s) Exam code: EXC 36735 Grading scale: ECTS Resit: Examination every semester |
Exam category: School Exam Form of assessment: Written School Exam - pen and paper Exam/hand-in semester: First Semester Weight: 70 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Final written examination under supervision. All exams must be passed to obtain a final grade in the course. Exam code: EXC 36736 Grading scale: ECTS Resit: Examination every semester |
All exams must be passed to get a grade in this course.
| Activity | Duration | Comment |
|---|---|---|
Teaching | 36 Hour(s) | |
Feedback activities and counselling | 6 Hour(s) | Review of assignments in plenary |
Examination | 3 Hour(s) | |
Prepare for teaching | 73 Hour(s) | |
Group work / Assignments | 38 Hour(s) | Preparation of home assignments and mid-term exam |
Student's own work with learning resources | 45 Hour(s) |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.
All exams must be passed to obtain a final grade in the course.