34547 - Risk Management

Learning outcomes

The student collates the risk management techniques by corporations and financial institutions. He can identify a company’s risk exposure and select the most appropriate financial derivative instrument to hedge against it.

Course contents

This course focuses on finance-related risk management techniques designed to maximize value of firm. The course highlights the management of financial risk with emphasis on recognition of financial price risk and tools of risk management from business firm's perspective. A relevant part of the course is devoted to the analysis of derivatives and their uses in risk management.

 

The course is divided into four parts:

 

I:               Concepts and the economics of Risk Management

II:             Understanding and measuring financial risk

III:           Tools for Market Risk Management (financial derivatives)

IV:           The practice of Risk Management

 

The first part of the course will address the general concepts of risk management, trying to give an answer to the question “why do firms (should) hedge?”. The second and the third part will be the most technical and it will cover the tools for measuring and hedging risks. During this part you will become familiar with concepts such as forward, futures, options and swaps (commonly known as financial derivatives). The last part will focus on the strategy of the risk management. 

Readings/Bibliography

Brealey R., Myers S. and F. Allen, "Principles of Corporate Finance”, 10/e, 2011, McGraw-Hill (chapters: 20,21,26 and 27) 

List of papers TBD

Assessment methods

The exam will include one practical case and one open question. The practical case is aimed to assess your ability to put in practice corporate hedging techniques; the open question is intended to evaluate your level of understanding and your analysis capability of the selected papers.  

Office hours

See the website of Emanuele Bajo