Financial Risk and Management

Transcription

1 Financial Risk and Management Course No: Credit:2 Prerequisite: Program:Undergraduate Instructor:Chen Jia Semester:2015 Fall Instructor s resume/brief introduction(within 500 words) Jia Chen is an assistant professor of finance at the Guanghua School of Management., Peking University. He teaches Financial Risk Management, International Financial Management, and Financial Markets and Institutions for undergraduate students, Master of Finance students, and MBA students. His primary research interest is empirical asset pricing. His current research also covers financial institutions, financial crises, and international finance. Jia earned a Ph.D. in finance and Master in physics from Ohio State University. He joined Guanghua School of Management at Peking University in Before joining Guanghua, he taught at the Fisher College of Business of the Ohio State University. Instructor s contact information TA s contact information Office hour Program Learning Goals and Objectives Learning Goal 1: Graduates will possess a solid understanding of business and management and will be able to translate this knowledge into practice. 1.1 Objective 1 Our students will have a good command of fundamental theories and knowledge. 1.2 Objective 2 Our students will have a good command of analytical methods and decision-making tools. 1.3 Objective 3 Our students will be able to apply theories and methodologies in key business functions. Learning Goal 2: Our students will be able to think critically. 2.1 Objective 1 Our students will be able to identify and summarize problems 2.2 Objective 2 Our students will be able to collect data and analyze problems in a critical manner 2.3 Objective 3 Our students will be able to put forward effective solutions to business problems Learning Goal 3: Our students will have a sense of social responsibility.

2 3.1 Objective 1 Our students will be aware of the importance of ethics. 3.2 Objective 2 Our students will be able to provide solutions that take account of contrasting ethical standpoints. Learning Goal 4: Our students will be effective communicators. 4.1 Objective 1 Our students will be proficient in oral and written communication. 4.2 Objective 2 Our students will possess good interpersonal skills. 4.3 Objective 3 Our students will be able to adapt to diverse learning environments. Learning Goal 5: Our students will have global perspectives. 5.1 Objective 1 Our students will be aware of social and cultural differences. 5.2 Objective 2 Our students will be aware of the impact of globalization on business operations, opportunities, and challenges. 5.3 Objective 3 Our students will be proficient in English. 1 Course description This course is designed to train the participants in evaluating and managing risks using an enterprise- wide approach. Most of the course deals with financial risks. The course starts with an analysis of how risk management contributes to firm value. A general framework for how to use risk management to create value is presented next. The course then examines the measurement and management of market risks, cash flow risks for non-financial firms, interest rate risks, credit risks, and operational risks. The course turns next to the implementation issues of enterprise-wide risk management, showing how to aggregate risks across the firm and how to use a firm-wide risk measure to make various corporate decisions and to evaluate performance within the firm. The course finishes with a discussion of recent issues in risk management. The emphasis of the course is on creating value with risk management rather than on the technical details of statistical measurement and pricing of derivatives. Risk management problems for financial intermediaries as well as for firms outside the financial sector are examined. Students will learn how to manage financial risks through lectures, exercises, and cases. 2 Pedagogy This course uses a combination of classroom lectures, assignments, case study, and discussions to convey the material. Each student is expected to contribute regularly to classroom discussion. This is particularly true when we work with cases, but also during lectures and general discussions. 3 Course materials TextbookJohn C. Hull, Risk Management and Financial Institutions, third edition, 2012, Wiley. We are going to base some of the theories in this course on this textbook, but this textbook is not required. It is fine to share a copy or to borrow a copy. Reference bookderivatives and Risk Management, by Rene M. Stulz, Southwestern, 2003 Lecture SlidesI will handout my lecture slides before each class. Cases and reading materialsa majority of this class will be based on case discussions. You are highly recommended to read each case before the class and participate in case discussions. You

3 may use the reading materials to prepare for classes, but we may or may not discuss the reading materials in class. I will hand out the cases and reading materials before classes. 4 Course evaluation The final course grade will be allocated according to the following formula: Three assignments (group) 35% Group presentation 20% Class attendance and participation (individual) 15% Final exam (individual) 30% 4.1 Three assignments Students will form groups of five people and finish three group assignments. The first assignment is exercise problem solving, which accounts for 5% of the total course grade. The second and third assignments are case problem solving and respectively account for 20% and 10% of the total course grade. I will hand out the exercise and case problems later in the semester. 4.2 Presentations I will assign each group a presentation topic. The presentation will take approximately 15 minutes with additional 10 to 15 minutes for questions and discussions. The presentation should have a well motivated question, a clear structure, relevant and well-organized facts, and a conclusion. The presentation topics can include banking crises, sovereign debt crises, currency crises, Basel Accords, Chinese banks risk management, interest rate risks, exchange rate risks, political risks, risk man- agers job opportunities, risk governance and risk culture, etc. Each group is encouraged to go over with me the presentation plan before the presentation. Students are encouraged to choose any other topics that they find interesting. 4.3 Attendance and participation A substantial portion of your grade (15%) will be based on class attendance and participation. notification to me and to the TA has to be given for any class you are going to miss, and, if excused, you are required to submit, before class, a write up of the case, answering all the assignment questions. As for participation, I expect all students to actively participate in class discussions by asking thoughtful questions. Class participation will primarily be graded based on your contribution to lecture, and case discussions in the form of questions and comments. I will use both cold-calling and warm-calling to maximize participation. Each student will be given ample opportunity to contribute to the classroom discussion. I and teaching assistant will monitor contributions daily. 4.4 Final exam The final exam will be based on lectures and group assignments. It will be on November 30th.

4 5 Teaching assistants The teaching assistant for this course is Jie LIU and Yinglun ZHU pku.edu.cn). 6 Office hours Office hours are by appointment. I will also be available immediately after each class. Students can contact the TAs or me at any time by sending us an . 7 Acknowledgment Many of the lecture notes and other course materials are derived from those used by Professor Rene M. Stulz at the Ohio State University and Professor John Hull at the University of Toronto. I thank all of them for their help. 8 Course Outline and Estimated Timetable The course outline and estimated timetable are approximate and tentative and subject to change with appropriate notice. Sep 14th Course introduction and overview Readings: Six Ways Companies Mismanage Risk; The New Arsenal of Risk Management Sep 21st Measurement of risks and Value-at-Risk Readings: Managing Risks: A New Framework Sep 28th Beyond VaR Investment bank versus commercial bank Case: The Tip of the Iceberg: JP Morgan Chase and Bear Stearns (A) Oct 12th Risk management at a small bank Case: Risk Management at Wellfleet Bank: All That Glitters Is Not Good Oct 19th Hedging risks using derivatives Risk management at a non-financial firm Case: Enterprise Risk Management at Hydro One Oct 26th Beyond Riskmetrics Case: Hedging Currency Risks at AIFS

5 Nov 2nd Credit risk I Nov 9th Credit risk II Nov 16th Credit risk III JPMorgan Chase and the CIO Losses Nov 23th Operational risk Nov 30th strategy Enterprise Risk Manangement and Risk