| CODE | BFI5403 | ||||||||||||||||
| TITLE | Advanced Risk Management | ||||||||||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | ||||||||||||||||
| MQF LEVEL | 7 | ||||||||||||||||
| ECTS CREDITS | 5 | ||||||||||||||||
| DEPARTMENT | Banking, Finance and Investments | ||||||||||||||||
| DESCRIPTION | Risk management is the set of processes through which management identifies, analyzes, and, where necessary, responds appropriately to risks that might adversely affect realization of the organization's business objectives. The response to risks typically depends on their perceived gravity, and involves controlling, avoiding, accepting or transferring them to a third party. Whereas organizations routinely manage a wide range of risks (e.g. technological risks, commercial/financial risks, information security risks etc.), external legal and regulatory compliance risks are arguably the key issue in a Governance, risk management, and compliance (GRC) process. Different investors and investor groups have different objectives and requirements, but all deserve the best return that risk can buy. Return is simple enough to measure, but at the same time dangerously luring if not seen in the context of risk. Risk, by contrast, is multifaceted and elusive. Because portfolio risk is often hidden behind apparently quantifiable and orderly intermarket and interstrategy relationships (or nonrelationships), its true dimensions are easy to understate during nonstressed market periods.Underestimation of risk can lead to superb performance followed by sudden substantial losses. Overestimation of risk leads to inefficient utilization of available capital. Consequently, a highly methodical and multidimensional approach toward balancing the naturally interrelated investment companions “return”and “risk” is essential to successful investing. This study-unit looks at the risk fundamentals in the context of the modern financial industry and corporate treasury, focusing mainly on Hedge Funds and Banks. The topics covered are intended to provide students with knowledge of how risk exposures are identified, understood, measured and managed within the Financial Services Industry. Students are exposed to widely accepted measures of risk such as Value-at-Risk and analytical and numerical methods used in the computation of risk measures. The content of the study-unit is a mix of quantitative and qualitative approaches, with all the required knowledge of mathematics, statistics and interpretation provided during the lectures. Non-technical students will be guided through the content and a strong emphasis on practical aspects to risk management is maintained throughout. The coursework provided ensures that students grasp the practical side to risk measurement, monitoring and management. The unit provides the student with insights from theory and practice on h How Traders Manage their Risks in the trading rooms of Banks and Investment firms. Also, it will provide practical examples of how to measure the components of Risk, i.e. - Volatility - Diversification - Leverage - Illiquidity Moreover, the study-unit will cover areas such as Value at Risk, Scenario Analysis and Stress Testing, back testing, reverse stress testing, Operational and Integrated Risk management, Business Continuity Planning, Liquidity and Model Risk, regulatory aspects such as CRD and case studies of Risk Management Mistakes . Non-technical students will be guided through the content and a strong emphasis on practical aspects to risk management is maintained throughout. The coursework provided ensures that students grasp the practical side to risk measurement, monitoring and management. Study-Unit Aims: - Provide students with a practical and theoretical appreciation of the role of the risk manager and knowledge of the mechanics behind the measurement, monitoring and the management of both the major and less major risks faced by financial institutions; - Secure a good grounding in the theory of derivative pricing and the Greeks, and their use in the treasury environment; - Enable students to grasp the logic behind, and apply, numerical methods to problems arising in risk analysis. Introduce industry standard risk measurement concepts and models including but not limited to Value-at-Risk, sharp ratio and Conditional-VaR and their assumptions; - Provide working knowledge behind the practical uses of volatility and correlation forecasting in the context of risk measuremen, monitoring and management. Moreover, in doing so enable the student to identify risks attached to the use of financial derivatives and alternative risk structures and raise awareness as to the risks attached to the use of models. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - List and explain the assumptions of various risk management models; - List and explain the risk management benefits and limitations; - Explain the various theoretical models used in risk management; - List and describe the most popular methods used in risk measurement and risk management. 2. Skills: By the end of the study-unit the student will be able to: - Evaluate and compute risk measures both analytically and numerically; - Interpret measures of risk and use them as input to taking risk management decisions; - Evaluate news items and assess their risk management implications; - Evaluate risk management reports; - Interpret results of academic literature and translate them into risk management practices; - Compute the solvency requirements of financial firms. Main Text/s and any supplementary readings: Main Texts: - Hull, John C. Risk Management and Financial Institutions. 5th ed. Newark: Wiley, 2018. Wiley Finance Ser. Web. Supplementary Readings: - Damodaran, A. Strategic Risk Taking: A Framework for Risk Management, 1st edition. 2007. Financial Times/ Prentice Hall |
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| ADDITIONAL NOTES | Pre-requisite Qualifications: B.Com. (Hons.) Banking & Finance, B.Com. Banking & Finance Major or equivalent | ||||||||||||||||
| STUDY-UNIT TYPE | Lecture | ||||||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Simon Grima Tyrone Mizzi |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2024/5. It may be subject to change in subsequent years. |
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