ØABED4300 Risk Management Course description

Risk management has become an indispensable tool for the management of non-financial and financial corporations alike. This course will make students familiar with risk measurement and management techniques, their advantages and deficiencies. We will cover different sources of risks and how to measure and manage those risks, with a particular focus on financial risks and value at risk. The course will also discuss the economic rationale for risk management, the regulation of banks, and analyze the role of risk management in the last financial crisis and in connection with famous bankruptcies like Long Term Capital Management and Lehman Brothers.

In risk management, we make heavy use of derivative securities to hedge against risks. For that reason, it is strongly recommended to take this course together with ØABED4200 Derivatives. The class is quantitative and will employ spreadsheets.

Applied Statistical Methods, Corporate Finance and Financial Markets.

None.

After completing the course, students will acquired the learning outcomes defined in knowledge, skills and general competence:

Knowledge

The student has

• a broad overview of different sources of risks and how they affect the cashflows and the value of the corporation
• knowledge about how to quantify those risks with popular risk measures
• knowledge of how to mitigate or eliminate the risk exposure with standard derivative contracts
• understanding of when risk management adds value to a corporation

Skills

The student can

• identify different sources of risks and quantify a corporation¿s exposure to them
• calculate the impact of different risks using popular risk measures, e.g., Value-at-Risk, for individual positions and for entire portfolios or the entire corporation
• employ appropriate financial instruments to mitigate or eliminate the impact of the different sources of risks.

Competence

The student is able to quantify and manage the risk of a corporation and has a critical understanding of the limitations of the various techniques discussed in the course.

The course is taught in plenary lectures, and students work on and discuss different assignments in groups and plenary sessions.

In order to be able to register for the exam, the student must have the following approved work requirements:

Students have to hand in written assignments by set deadlines during the semester. The scope of the assignment (number of pages) varies depending on the nature of the assignment. If the assignment is not approved, the student will be given one opportunity to submit an improved version. The lecturer will inform students of deadlines for submission.

Written school exam (4 hours).

Calculator (see separate regulations).

One dictionary (either first language-English/English-first language or English/English)

Grading scale A to F.

An internal and an external examiner will grade the exam.

A selection of at least 25% of the exam papers will be assessed by two examiners. The grades awarded to exam papers assessed by the external and internal examiner will be used to determine the level of all exam papers.