Risk Management

Objectives

At the end of the semester students should be able to:
- Describe the risk management process and identify problems and challenges which can arise in the risk management process
- Learn the concept of risk and differentiate between risk and uncertainty and identify and distinguish the different types of risks
- Evaluate and apply tools and procedures used to measure and manage risk, including quantitative measures, qualitative assessment, and enterprise risk management
- Interpret the relationship between risk and reward, understand the portfolio choice under uncertainty and the benefits from diversification
- Apply appropriate methods to hedge financial and non-financial risks
- Understand the Structure and mechanics of OTC and exchange markets and how to evaluate financial instruments
- Understand how to use derivative securities in Hedging strategies
- Understand the main tools used to measure and manage market, credit, currency risks
- Understand the role of insurance in risk management

General characterization

Code

100064

Credits

6.0

Responsible teacher

Jorge Miguel Ventura Bravo

Hours

Weekly - Available soon

Total - Available soon

Teaching language

Portuguese. If there are Erasmus students, classes will be taught in English

Prerequisites

NA

Bibliography

Jorion, F. (2011). Financial Risk Manager Handbook (6th Ed), John Wiley & Sons; Bessis, J. (2010). Risk Management in Banking, 3rd Edition. John Wiley & Sons.; Rejda, George (2011). Principles of Risk Management and Insurance, 11/E. Prentice Hall; Hull, J. (2003). Fundamentals of Futures and Options Markets, 8th Edition. Prentice Hall.; Elton, Edwin J., Martin J. Gruber, Stephen J. Brown, William N. Goetzmann (2014), Modern Portfolio Theory and Investment Analysis, 9th Edition, John Wiley & Sons, New York.

Teaching method

Expositional and Questioning Methods
Active Methods and Case Studies 
Investigation projects and practical applications.
Knowledge development and learning capability.

Evaluation method

1st Season
- Group Assignments (40% of final grade)
- Individual final written exam (60% of final grade, with a minimum grade of 9/20)

2nd Season
- Group Work Assignments (30% of final grade)
- Individual final exam (70% of final grade, with a minimum grade of 9/20)
 

Subject matter

1. Foundations of risk management
The nature of risk; Basic risk types, measurement and management tools, Creating value with risk management, The role of risk management in corporate governance, Enterprise Risk Management (ERM), Financial disasters and risk management failures
2. Portfolio Theory
Risk Measurement and Metrics; Risk and return; Attitudes toward Risks; Portfolio theory and diversification; Efficient frontier; Choice under Uncertainty: Expected Utility Theory; The Capital Asset Pricing Model (CAPM); Risk-adjusted performance measurement; Multi-factor models
3. Financial Markets and Products
Structure and mechanics of OTC and exchange markets; Equity, Currency, and Commodity Markets; Bonds and other Fixed-Income Securities; Interest rate risk measuring and managing; Introduction to derivative securities: payoff structure, mechanics, and valuation of forwards, futures, swaps and options; Foreign exchange risk; Rating agencies
4. Market Risk Measurement and Management
Value-at-Risk (VaR); Expected shortfall (ES) and other coherent risk measures; Extreme value theory (EVT)
5. Credit Risk Measurement and Management
6. Risk management and Insurance
7. Valuation and risk models
8. Introduction to Operational and Integrated Risk Management