Risk management and decision-making

Apart from identification of risk sources, the module offers a detailed analysis of tools and processes designed to manage these risks which are used by the financial industry. The latter is highly sought after in the financial industry.

Topics covered

• The Capital Asset Pricing Model
• Value at Risk
• Volatility, Correlations and Copulas
• Regulatory Risk
• Market Risk
• Credit Risk
• Scenario Analysis, Stress Testing and Operational Risk
• Liquidity Risk
• Model Risk
• ABSs, CDOs and, the Credit Crunch of 2007

Learning outcomes

If you complete the module successfully, you should be able to:

• describe and critically assess the processes through which companies make decisions in risky environments.
• explain how financial instruments can be used to manage portfolio risk.
• illustrate the following types of risk: credit, market, operational, reputational and regulatory.
• compare risk databases and their management.
• reason critically with respect to alternative risk management strategies.
• assess best strategies according to an available set of information and adapt appropriate strategies once a set of information changes.
• create the most suitable set of information for the decision-making process.
• measure the following types of risk: credit, market, operational, reputational and regulatory.
• professional financial tool skills and case study interpretation skills to support decisions.
• work both independently and in teams to create and manage financial strategies.
• present highly technical financial material to non-practitioners simply and clearly.
• utilise real-time data to estimate the different sources of risk.
• utilise financial tools and case studies to support strategic decisions.
• synthesise and use information and materials from a variety of different sources to support an argument.
• apply research skills into risk management problems and the application of these in business decision-making.

Assessment

This module is assessed by:

Coursework (50% weighting):

• There is one item of coursework for this module which contributes to the final assessment mark for this module:
• Coursework: a written essay of a maximum of 2,000 or 2,500 words (deadline – weeks 9-12) The coursework is designed to check student progress, extend and reinforce concepts covered and also test individual performance.

Examination (50% weighting):

• The final piece of assessment will be an unseen written examination of 2 hours’ duration.

Essential reading

The following is provided as part of the modules materials after you register:

• J.C. Hull, Risk Management and Financial Institution, John Wiley and Sons, 2015
• S.L. Allen, Financial Risk Management, John Wiley and Sons, 2013
• P. Jorion,Value at Risk, McGraw-Hill, 2006