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2023/2024  KAN-CFSAO1007U  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 cand.merc. and CFSA (CFSA)
Course coordinator
  • Linda Sandris Larsen - Department of Finance (FI)
Main academic disciplines
  • Finance
Teaching methods
  • Face-to-face teaching
Last updated on 29-11-2023

Relevant links

Learning objectives
The course gives the students a theoretical as well as practical understanding of the risk management process from the perspective of financial institutions as the process by which various risk exposures are identified, measured, and controlled. At the end of the course, students are expected to be able to:
  • Analyze and discuss the role of risk management in different financial institutions.
  • Explain how derivative securities can be used for hedging and speculation.
  • Explain, apply, and implement basic models for the pricing of forwards, futures, swaps, and options.
  • Construct hedging positions for financial instruments based on "greek" risk measures.
  • Apply and analyze Value-at-Risk concepts and related risk measures such as expected shortfall.
  • Calculate, apply and analyze 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). Calculate and analyze the capital requirements under the different Basel regulations.
  • Analyze, apply and discuss basic credit risk modelling concepts.
  • Calculate and analyze default probabilities and related concepts using reduced form models as well as the structural model by Merton.
  • Calculate values of credit-risky debt securities in the Merton model under different seniority assumptions.
  • Calculate, apply, and analyze relevant liquidity risk measures.
Course prerequisites
The course is not intended to be an introductory course. Students are assumed to be familiar with the concepts, theories, models, and methods taught in the course Financial Market Theory or a similar course.
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-point grading scale
Examiner(s) Internal examiner and external examiner
Exam period Spring
Aids Limited aids, see the list below:
The student is allowed to bring
  • An approved calculator. Only the models HP10bll+ or Texas BA ll Plus are allowed (both models are non-programmable, financial calculators).
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
Make-up exam/re-exam
Same examination form as the ordinary exam
The number of registered candidates for the make-up examination/re-take examination may warrant that it most appropriately be held as an oral examination. The programme office will inform the students if the make-up examination/re-take examination instead is held as an oral examination including a second examiner or external examiner.
Course content, structure and pedagogical approach

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. We will give special attention to derivative instruments, how these instruments are priced, and how these can be actively used in the process of managing financial market risks. Modern capital requirements rely increasingly on Value-at-Risk or related risk measures, and 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. volatility modelling, back-testing, and historical simulation techniques. Throughout the course we will give special attention to derivative instruments and how these can be actively used in the process of managing financial market risks. Credit risk and liquidity risk will also be covered in the course. Overall, the course offers a comprehensive presentation of theoretical as well as practical aspects underlying the measurement and application of risk management.

Description of the teaching methods
Lectures, videos, and 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. This gives the students immediate feedback of their understanding of the covered topic. Online and in-class quizzes are offered throughout the course with the purpose of giving the students a quick indication of their understanding of each topic. At the exercise classes the students receive feedback on their solutions to the given exam-relevant exercises. Finally, Students are encouraged to take active part in both lectures and exercises by contributing with questions and comments. The teachers will do their best to provide useful immediate feedback.
Student workload
Lectures and exercises, including own preparation 202 hours
Exam 4 hours
Expected literature

Hull, John C. Risk Management and Financial Institutions. 6th edition. Wiley 2023 (or later edition).

Last updated on 29-11-2023