Download FINANCIAL RISK MANAGEMENT

FINANCIAL RISK MANAGEMENT
Course Objective:
This course will focus on variety of risks faced by financial
managers and the tools available for managing these risks.
Particularly, we shall focus on credit risk, interest rate and liquidity
risks, market risk, foreign exchange risk and country risk. We shall
learn about the tools and techniques available for managing these
risks such as future contracts, option contracts, swaps, value-at-risk
(VAR) and other standard hedging techniques and measures of
volatility. Students attending this course are expected to have
studied basic courses of investment and portfolio management and
have good understanding of asset pricing models.
Course Contents:
1. Introduction: Motivation for risk management, Why risk
management, Creating value with risk management, Find risk
and return for an asset and portfolio.
2. Financial Engineering: derivative (forwards, futures, swaps,
basic and exotic options) and standard hedging techniques.
3. Measuring volatility: EWMA and GARCH models, implied
and realized volatility.
4. Market Risk: VaR (Value at Risk) measurement (Risk
Metric, historical and Monte Carlo Approaches), backtesting, stress testing, alternative risk measure.
5. Liquidity risk.
6. Credit Risk: Merton Model, modern structural and reduced
form models, credit derivatives.
Recommended Books:
1) There is no single book that will cover all the topics included
in this course. Selected chapters from the following books
will be covered in the course.
2) Hull, John C. , 2007. Risk Management and Financial
Institutions (RMFI), Prentice-Hall.
3) Hull John C., 2006, Options, Futures and other derivatives
(OFOD), Prentice-Hall (sixth edition).
4) Ross, Stephen A., Westerfield, RandolphW., Jaffe, Jeffery F
& Roberts Gordon S., Corporate Finance, Any edition,
McGraw Hill Ryerson, 1999. (Referred to below as ‘RWJR’)
5) Risk Management and Derivatives by Rene Stulz, second
edition.