Financial Risk Management

COURSE DESCRIPTION

A Black Swan is costly. This statement is absolutely agreed by businessmen and professionals, particularly those facing inherent risk in their professional lives. Minimizing the cost of risk to an optimum level unanimously means that we are increasing the value of a firm and the value of any investment.

Using integrated approaches and real life cases, the course will emphasize discussion on the design and implementation of risk management practices. Basically, it purports to help students realize, and understand various state-of-the-art risk management theories and practices (such as loss control, loss financing, and internal risk reduction mechanisms) as well as their advancement in the future. Hence, risk management course is of importance to business students expecting to deal with business and professional lives in the future in a global context.

This course covers all kinds of financial risks such as credit risk, currency risk exposure, interest rate risk, price volatility risk, among others. Hedging financial risk with various risk management concepts, tools, and techniques will be held by the derivative products: Futures, Forwards, Options, and Swaps.

LEARNING OUTCOMES

• Students will be able to understand and apply the systems and models that enable financial operations to be carried out in the field of Hedging Financial Risk.
• Students will use modern techniques in Finance to minimize the financial risk in the business operations such as Currency Risk Management, Interest Rate
• Students will acquire solid knowledge of derivative products applied on all financial markets
• Minimize Currency Risk

COURSE CONTENTS

Financial Risk Management

Topic 1 – Recap of:

• All financial Assets
• Definition of Risk
• Foreign Direct Investment
• Short- and Long-Term Financing
• Risk Vs. Return

Topic 2 – Introduction to Risk in the financial markets

• Components of Interest Rate – Return vs. Risk
• CAPM model
• Bid/Ask
• Market Risks

Topic 3 – Valuation of Financial Risk

• Standard Varian under Price Lag Models
• VaR.

Topic 4 – Foreign Exchange Market

• Functions and Structure
• Market Players
• The Spot Market
• The Forward Market
• Model to forecast financial risk management

Topic 5 – Hedging and Risk Management

• Risk Management and Hedging Strategies
• Managing Economic and Translation Exposure
• Usage of Financial Products: FRAs – Futures

Topic 6 – Hedging Capital Markets: Stocks

• Options Market and their concepts
• Daily Settlement of Positions and Posting Margins
• Building Strategies using Derivatives to Hedge: Protective Put, Covered Call, Put Bear Spread, Straddle, etc

Topic 7 – Hedging Interest Rate Risk

• Using Swaps contracts: Plain Vanilla Swaps
• Swap options

Topic 8 – Credit Risk Management

• Use of Financial Reports – D&B Reports
• Use of SAP to manage risks in Multinational Companies

Topic 9 – Financial Crisis

Topic 10 – Other Topics in Finance Risk Management (Financial Ethics)