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2017/2018  KAN-CFSMO1113U  Risk Management

English Title
Risk Management

Course information
Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Start time of the course Spring
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Linda Sandris Larsen - Department of Finance (FI)
Main academic disciplines
  • Finance
Last updated on 30-05-2017

Relevant links
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: The aim of the course is to describe the risk management process from the perspective of financial institutions as the process by which various risk exposures are identified, measured, and controlled. Value-at-Risk is a quantitative risk management tool that has been developed to facilitate the assessment and communication of financial risks. The course offers a comprehensive presentation of theoretical as well as practical aspects underlying the measurement and application of Value-at-Risk.

The aim of the course is that students after having followed the course are able to:
  • Analyze and discuss the role of risk management in different financial institutions.
  • Construct hedging positions for financial instruments based on "greek" risk measures.
  • Calculate fixed-income risk measures such as duration for bond portfolios and use these for hedging decisions.
  • Apply and analyze Value-at-Risk concepts and related risk measures such as expected shortfall.
  • Calculate VaR risk measures for portfolios of stocks and financial derivatives with historical simulation and model-based approach.
  • Analyze and discuss the key concepts of the Basel rules (financial regulation).
  • Analyze and discuss basic credit risk modelling concepts.
  • Calculate values of credit-risky debt securities in the Merton model under different seniority assumptions.
  • Analyze and discuss the problems for risk management created by liquidity risk and model risk.
Examination
Risk Management:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) Internal examiner and external examiner
Exam period Spring
Aids Limited aids, see the list below:
The student is allowed to bring
  • Non-programmable, financial calculators: HP10bll+ or Texas BA II Plus
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
At all written sit-in exams the student has access to the basic IT application package (Microsoft Office (minus Excel), digital pen and paper, 7-zip file manager, Adobe Acrobat, Texlive, VLC player, Windows Media Player). PLEASE NOTE: Students are not allowed to communicate with others during the exam : Read more about exam aids and IT application packages here
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure

The course will motivate and discuss the need for financial risk management in light of recent financial scandals and disasters and in relation to international capital adequacy requirements for banks and other financial institutions. As modern capital requirements rely increasingly on Value-at-Risk we will take a detailed look at this quantitative risk measurement tool. The course will go through all of the steps necessary for computing reliable Value-at-Risk numbers, e.g. parameter estimation, volatility modelling, back-testing, stress-testing, Monte Carlo and historical simulation techniques. Throughout the course we will give special attention to how derivative instruments can affect Value-of-Risk for portfolios and thus be actively used in the process of managing financial market risks. Credit risk and specific risk measures for interest-rate risk and option risk will also be covered in the course.
Teaching methods
Lectures with exercises.
Feedback during the teaching period
In order to increase the students immediate understanding and reflection of the course material there will be buzz-assignments and questions during the lectures. The students will be asked to work at exam-relevant problems before the exercise-classes. At the exercise class the students have the opportunity to receive ongoing feedback on these problems.
Student workload
Lectures and exercises, including own preparation 202 hours
Exam 4 hours
Expected literature

Hull, John C. Risk Management and Financial Institutions. 4th edition. Wiley 2015 (or later edition).
 
Last updated on 30-05-2017