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Risk Management

Objectives

This course focuses on the process by which risks are identified, assessed, measured, and managed in order to create economic value for businesses and society. This process, known as the risk management process, has rapidly evolved in recent years to become an indispensable function in many institutions. In today¿s world of rapid information flows, rising volatility, regulatory concerns and oversight, prudent management increasingly requires understanding, measuring and managing risk. Merged or individual banks, securities dealers, insurance companies and industrial firms with significant financing operations, all require enterprise-wide risk management that may span many operations across currencies and locations in real time. Risk management establishes standards for aggregating disparate information, gathering market data, calculating risk measures and creating timely reporting tools for management market, credit, and operational risks. This course covers quantitative methods, major financial products, as well as market, credit, operational, and integrated risk management. The course is structured according to the Financial Risk Manager (FRM®) Program Manual of the Global Association of Risk Professionals (GARP).

General characterization

Code

100064

Credits

6.0

Responsible teacher

Afshin Ashofteh

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

Exam 1

  • Individual written final Exam (50% of final grade, with a minimum grade of 8/20)
  • Quizzes (50% of final grade)

Exam 2 & ALL Extraordinary Exams

  • Individual written final Exam (60% of final grade, with a minimum grade of 8/20)
  • Quizzes (40% of final grade)

 

Subject matter

1. Foundations of risk management:
The Investment Environment; Asset Classes and Financial Instruments; How Securities Are Traded; Time Value of Money
2. Portfolio Theory and practice
Risk Measurement and Metrics; Risk and return; Attitudes toward Risks; Portfolio theory and diversification; Capital Allocation to Risky Assets; Efficient frontier; Choice under Uncertainty: Expected Utility Theory; The Capital Asset Pricing Model (CAPM); Risk-adjusted performance measurement; The Efficient Market Hypothesis
3. Fixed-Income Securities
Bond Prices and Yields; The Term Structure of Interest Rates; Managing Bond Portfolios
4. Equity Securities Analysis and Valuation
Equity Valuation Models, Financial Statement Analysis
5. Options, Futures, and Other Derivatives, 
Introduction to derivative securities: payoff structure, mechanics, and valuation of forwards, futures, swaps and options; Futures, Swaps, and Risk Management
6. Financial Risk Measurement and Management
Value-at-Risk (VaR); Expected shortfall (ES) and other coherent risk measures; Extreme value theory (EVT); Credit Risk Measurement and Management