Define the context of risk management, risk identification and prioritization;

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1 Course unit title: Financial Risk Management Course unit code: FIN 406 Type of course unit: (Compulsory/optional) Level of course unit: (First, second or third cycle) Year of study: Semester when the unit is delivered: Number of ECTS credits allocated: Name of lecturer(s): Compulsory Bachelor (1 st Cycle) 4 th 8 7 TBA Learning outcomes of the course unit: Upon successful completion of this course students should be able to: Define the context of risk management, risk identification and prioritization; Recognize and apply the risk management theories in practical real life in banking, insurance, financial services and business; Identify, explain and simulate how to measure interest rate, market, credit, offbalance sheet, foreign exchange, sovereign, technology, operational and liquidity risks through practical problems and questions; Compute and interpret the various risk management options, namely: hedging, insurance and diversification Apply the Black-Scholes, Vasciek and Merton formula and the binomial tree for options valuation; Apply Basel II/ III, and Solvency II calculations for bank and financial institutions capital adequacy; Critically analyse the Market and Credit Risk VaR and Losses, Volatility,

2 Correlations and Copulas, Liquidity Risk; Explain and apply risk transfer (contractual transfer, insurance, cost-benefit, securitization, derivatives, implementation of risk financing plans), risk controlling techniques, risk financing options, methods of risk monitoring, review, reporting and business continuity planning and management; Critically debate the International and UK regulatory risk environment; Apply scenario analysis and Stress Testing in Banking Calculate the economic capital and RAROC for bank risk management. Mode of delivery: Prerequisites and corequisites: Recommended optional program components: Course contents: Face-to-face FIN 101 None Objective: Risk Management aims at providing the students with the most modern utilised practices (models and technologies) in the finance and financial services industry to assess and manage various sets of risks individually and together. The course shows the students how to identify risk scenarios and quantify risk in conjunction with real world decision making problems. It helps in evaluating any type of risk in the industry and not only, but also in understanding the concept of risk management for any type of business (institutional, organizational, brand reputation, contractual, political, environmental and cultural considerations) in theory and practice, while being able to implement appropriate techniques. Description: This course deals with the way banks, insurance companies, pension funds and other financial institutions manage risk. It covers credit risk, market risk, operational risk, liquidity risk and model risk. The Application of foreign currency and interest rate risk technics is of particular concern, apart from risk management control, review and monitoring.

3 Students will perform risk modelling and forecasting, using various techniques (checklists, risk mapping, risk matrices, physical inspection, organizational charts, control self-assessment, business impact analysis, flow charts, fault trees, HAZOPs, brainstorming workshops, internal and external benchmarking, risk ranking. The nature of bank regulation and the Basel II and Basel III capital requirements for banks are examined and applied. Other topics include methods for monitoring volatilities and correlations, copulas, credit derivatives role in risk management and the calculation of economic capital and RAROC. Recent developments and contemporary issues pertaining to the subject-matter of the course. Recommended or required reading: Hull, John,Risk Management and Financial Institutions, Prentice Hall 2010 Risk Management, London, CII, Study text 655 Michel Crouhy et al. (2014).The Essentials of Risk Management, Second Edition McGrawHill. Rene Doff (2011). Risk management for insurers: risk control, economic capital, Solvency II, 2 nd Ed. London: Risk Books. Jorion, Phillipe Value at Risk, Mc-Grow Hill, 2001 ACCA F9 Paper- Chapters 19, 20 David Hillson. (2009) Managing Risk in projects.farnham, Gower. Saunders, A, Cornett, M.M,Financial Institutions Management, A Risk Management Approach, Mc Graw-Hill International Ed.7, 2011 Mark S. Dorfman David Cather (2013) Introduction to Risk Management and Insurance, 10/E, Prentice Hall.

4 George E. Rejda and Michael McNamara, Principles of Risk Management and Insurance (12th Edition) (Pearson Series in Finance) Allen L, Saunders, A. (2010), Risk Management in banking, Oxford, Oxford University Press. J A Chan-Lau (2013). Systemic risk assessment and oversight. London: Risk Books. Catalina Bolance et al. (2012) Quantitative operational risk models. London: Chapman & Hall. Simon Bennet. Farnham (2012) Innovative thinking in risk, crisis and disaster management.: Gower,. Panos Kouvelis,.( 2012 ) The handbook of integrated risk management in global supply chains. Wiley. Arjun Gupta, Wei-Bin Zeng, Yanhong Wu, (2010) Probability and statistical models: foundations for problems in reliability and financial mathematics.new York: Springer. Hubbard, D.W. (2010). How to Measure Anything: Finding the Value of Intangibles in Business. Wiley. Hubbard, D.W. (2009). The Failure of Risk Management: Why It's Broken and How to Fix It.Wiley Butler Cormac,Mastering Value at Risk, Prentice Hall, 1999 Golub, B, Tilman L (2000) Risk Management, Wiley Journals: The Journal. London. CII. Risk Management. Palgrave Macmillan. Journal of Risk Management and Financial institutions, Henry Stewart Publications. Websites: Association of Insurance and Risk Managers

5 Bank of England s Financial Stability Role lt.aspx/ Institute of Risk Management Planned learning activities and teaching methods: Class Instruction: Consultation: 42 Hours 15 Hours Assessment methods and criteria: Midterm Exam 20% Final Exam 40% Class Participation 10% Project/Assignments 30% 100% Language of instruction: Work placement(s): Place of Teaching: English No Regular Classroom European University Cyprus, Nicosia