This course examines modern techniques for managing financial risks, including market risk, credit risk, liquidity risk, and operational risk. The course starts with an analysis of risk management problems and risk profiles; then it provides measurement techniques for different types of financial risks on equities, bonds, financial derivatives. It will cover the measurement of value-at-risk (VaR) for measuring market risk and credit risk, economic capital, risk adjusted return on capital. It will discuss how risk measurement tools used for active management of the risk/return profile of financial institutions. It will also cover the new Basel III regulatory requirements for banks.

A 2-hour weekly lecture for 10 weeks, five 1-hour computer labs. The course contains asynchronous learning of pre-class reading material and preparations for incorporating financial databases into finance analysis.

ACCFIN5057

None

■ To provide participants with an in-depth knowledge of the most recent risk identification, measurement and management techniques. This topic is essential for people involved in managing risks, trading financial assets, operating hedge funds, making financial corporate strategy, as well as regulatory supervision of financial institutions.

■ To provide participants with the skills to quantify practically widely-used financial risks: Value-at-Risk.

■ To offer the techniques of analysing financial risks both for financial and industrial firms.

■ To offer participants with the knowledge in pursuing the Financial Risk Management certification organized by GARP.

By the end of the course students will be able to:

1. Discuss risk management problems, risk profiles, and financial risks, including market risk, credit risk, liquidity risk, and operational risk.

2. Evaluate Value-at-Risk (VaR) for market risk on stocks, bonds, and financial derivatives.

3. Compute VaR with different approaches, including closed-form, historical simulation method, and Monte Carlo simulation. Discuss traditional VaR limitations and assess the ability of VaR on measuring financial risks.

4. Analyse credit risk with its measurement, management, and derivative securities.

5. Discuss Basel regulation on financial institutions.

6. Work collaboratively in a group to produce a combined output, by liaising with other class members, allocating tasks and co-ordinating group meetings.

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.