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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. It also discusses investment risk management issues essential for risk professionals. 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

None.

Bibliography

MAIN

  • Bodie, Z. Kane, A. and Marcus, A. (2014). Investments, 10/E. McGraw-Hill Education
  • Hull, J. (2014). Fundamentals of Futures and Options Markets, 8th Edition. Prentice Hall.
  • Jorion, F. (2011). Financial Risk Manager Handbook, 6/E, John Wiley & Sons.

AUXILIARY – Advance topics after the course.

  • Bessis, J. (2010). Risk Management in Banking, 3rd Edition. John Wiley & Sons.
  • 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.
  • Rejda, George (2011). Principles of Risk Management and Insurance, 11/E. Prentice Hall
  • Fabozzi, F. J. (2012), Bond Markets, Analysis and Strategies, 8th Edition, Pearson.
  • Ashofteh, A., & Bravo, J. M. (2021). A conservative approach for online credit scoring. Expert Systems with Applications, 176, 114835. https://doi.org/10.1016/j.eswa.2021.114835  ,
  • Ashofteh, Afshin; M. Bravo, Jorge (2021). Spark Code: A Novel Conservative Approach for Online Credit Scoring [Source Code]. CodeOcean. https://doi.org/10.24433/CO.1963899.V1

Teaching method

Problem-Based Learning, Learning-by-doing, and hands-on approach. Meaning

  • Students must be actively involved directly in the learning process.
  • Students must follow the support materials in order to adapt and learn.
    • Active contribution to activities:
      • delivering the small tasks and final project.
      • answering the questions in our course discussion group and exchanging ideas (Link)
      • reviewing and commenting on the recommended YouTube videos (Link)
    • Investigation projects and practical applications. Knowledge development and learning capability.

The course will have theoretical and applied lessons. In the theoretical lessons, the instructor introduces and presents the different topics of the program. In the practical lessons, the instructor will provide examples and applications of the topics and invites the students to solve the exercises using the information they get from the theoretical lessons.

 

Evaluation method

The final grade will be a weighted average.

Exam 1

  • Quizzes: 40% of the final grade
  • Individual final written exam: 60% of the final grade, with a minimum grade of 10/20

Exam 2

  • Quizzes (30% of final grade)
  • Individual final written exam (70% of the final grade, with a minimum grade of 10/20)

The final exam will happen on the dates established by the school exams calendar.

Subject matter

  • LU1. 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
  • LU2. 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
  • LU3. 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
  • LU4. Market Risk Measurement and Management Value-at-Risk (VaR); Expected shortfall (ES) and other coherent risk measures; Extreme value theory (EVT)
  • LU5. Credit Risk Measurement and Management
  • LU6. Risk management and Insurance
  • LU7. Valuation and risk models
  • LU8. Introduction to Operational and Integrated Risk Management