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. Mastering the concepts underlying risk management in today's dynamic market environment gives you a holistic view of risk management. 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. This course is designed to cover a wide range of fundamental risk management topics and to prepare you to think about and handle risk in an integrated and coherent manner. The course covers the fundamental tools and techniques used in risk management and the theories underlying their use, including the foundations of risk management, quantitative analysis, spot and derivative financial markets and products and valuation Models. It also discusses market, credit, and operational risk management and investment risk management issues. The course is structured along the lines of the Financial Risk Manager (FRM®) Program Manual of the Global Association of Risk Professionals (GARP).

General characterization

Code

200069

Credits

7.5

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

Banking and Insurance Operations (recommended)
Financial Management (recommended)

Bibliography

Hull, J. (2018). Options, Futures, and Other Derivatives (10th Edition). New York: Pearson Prentice Hall.

Jorion, F. (2011). Financial Risk Manager Handbook (6th Ed), John Wiley & Sons.

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 (50% of final grade)
- Individual final written exam (50%, with a minimum grade of 9/20)2nd Season
- Group Work Assignments (35% of final grade)
- Individual final exam (65% 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), Quantitative Analysis; Portfolio Theory; Financial disasters and risk management failures.
2. Financial Markets and Products
Structure and mechanics of OTC and exchange markets; Structure, mechanics, and valuation of derivative securities: forwards, futures, swaps and options; Option valuation models: Binomial trees, Black-Scholes-Merton model, numerical methods; Exotic options; Hedging with derivatives; Structured Products; Managing interest rates risk using derivatives; FX risk; Asset Liability Management (ALM); Liquidity risk management.
3. Market Risk Measurement and Management
Value-at-Risk (VaR): Parametric and non-parametric methods of estimation; VaR mapping; Backtesting VaR; Expected shortfall (ES) and other coherent risk measures; Extreme value theory (EVT); Stress testing and scenario analysis.
4. Credit Risk Measurement and Management
Credit derivatives, CDS, Credit VaR, Structured finance and securitization
5. Mortality/Longevity Risk Measurement and Management
Stochastic mortality models; Longevity & Mortality Bonds; Q-Forwards; Longevity Swaps
6. Introduction to Operational and Integrated Risk Management

Programs

Programs where the course is taught: