Financial Risk Management

SYLLABUS MAN 6122
FINANCIAL RISK MANAGEMENT
3 CREDIT UNITS

COURSE DESCRIPTION

Risk is costly, particularly to executives and business owners facing inherent risk in their professional lives. Optimizing the cost of risk would increase the value of a firm. However, risk minimization, either by the self-managed method or by the risk-transfer approach, is not a trivial process to implement. If an executive decides to manage the cost of risk herself, she has to estimate direct and indirect costs pertaining to possibly risky events or occurrences. On the other hand, if the executive transfers the risk to a third party, she has to load in insurance premium as compensation for the insurer, comprised of administrative fees and the insurer’s business return.
Hence, financial risk management course is of importance for dealing with business and professional lives. This course is designed to introduce and discuss various risk management concepts, tools, and techniques in a global context. Using an integrated approach, this course emphasizes discussion on the design and implementation of risk management practices. Accordingly, it purports to help students understand and carry out various state-of-the-art risk management theories and practices as well as their future advances (such as loss control, loss financing, and internal risk reduction mechanisms).

LEARNING OBJECTIVES

Upon completion of this course, the student should be able to:

  1. Understand the comprehensive perspective on risk management and insurance concepts, tools, and
    techniques;
  2. Develop analytical and integrative thinking in understanding and implementing risk management
    practices;
  3. Increase their aspirations through an experiential approach, especially in the completion of
    assignments;
  4. Practice communication skills intertwined with risk management topics; and
  5. Enhance their creativity.

MAIN TEXTBOOK

  • Saunders, A. and Cornett, M. (2014). Financial Institutions Management: A Risk Management Approach, 8th Edition. McGraw-Hill, Boston, MA. (SC)

ADDITIONAL READING MATERIALS

  • Additional materials will be distributed during the sessions.

LEARNING METHOD

This method is a particular type of learning methods under the student-centered learning (SCL) paradigm. In this approach, students are active learners to find and construct their own knowledge. The instructor serves only as a facilitator to help students achieve learning objectives and develop interpersonal skills. The class time will be devoted to discuss any concepts, materials, and or issues in the subject.

EVALUATION METHOD

  1. Mid-term Exam (25%)
  2. Final Exam (25%)
  3. Presentation, Discussion, Participation (30%)
  4. Assignment and Quiz (20%)

COURSE SESSIONS

The course Financial Risk Management weighs 3 credit units which is held in 14 sessions of lectures and 2 sessions of exams @ 150 minutes for regular class and 12 sessions of lectures and 2 sessions of exams @ 180 minutes for the executive class.

Session Topic Reading Materials
1 Syllabus
Risk management overview
2 Why are financial institutions special? Risks of financial institutions SC (Ch. 1)
SC (Ch. 7)
3 Case 1 SC Ch. (2-6)
4 Interest rate risk SC (Ch. 8)
5 Interest rate risk SC (Ch. 9)
6 Credit risk SC (Ch. 10-11)
7 Case 2
Case 3		 Module
Mid-Term Exam
8 Liquidity risk, Sovereign risk SC (Ch. 12, 14)
9 Foreign exchange risk, Off-balance-sheet risk SC (Ch. 13, 16)
10 Market risk, Technology and other operational risks SC (Ch. 15, 17)
11 Insurance Case 4 SC (Ch. 19)
Module
12 Futures and forwards
Options, caps, floors, and collars		 SC (Ch. 22)
SC (Ch. 23)
13 Swaps Securitization SC (Ch. 24)
SC (Ch. 26)
14 Case 5
Case 6		 Module
Final Exam