The University of Southampton
Courses

MANG6298 Management of Financial Risk

Module Overview

In this module, the aim is to integrate risk management as part of financial theory and practice. The three main risk concepts in the investment and corporate risk management field are: market risk (times series), credit risk (financial ratings) and operational risk (evaluation and reporting techniques). We introduce the mathematical tools required to quantify, describe and analyse these risks quantitatively (including graphic representation, bootstrapping, calculation of transition matrices, ARCH/GARCH models, VaR, and Monte-Carlo simulation).

Aims and Objectives

Module Aims

To introduce to the students the main risk concepts in the investment and corporate risk management field: market risk, credit and operational risks. Mathematical tools required to quantify, describe and analyse these risks and their level of sophistication will be managed carefully so that the material can be accessible to the students with different quantitative background.

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • The role of volatilities and correlations in the management of financial risk;
  • How market, interest rate and credit risk are measured;
  • How credit, market, liquidity, interest rate and operational risks are managed.
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • Understand the latest trends in managing financial risk;
  • Apply insights from the latest research on management of financial risk to specific situations;
  • Know how operational and model risks are quantified and managed.
  • Understand and apply appropriate theoretical concepts, models, tools and techniques of risk management;
  • Appreciate the limitations of the different methodologies used in practice.
Transferable and Generic Skills

Having successfully completed this module you will be able to:

  • Recognise that in many situations there are a range of alternatives which should be evaluated;
  • Self-manage the development of learning and study skills, both individually and as part of a collaborative learning group;
  • Contribute successfully to a peer work group;
  • Apply the research skills to synthesise, analyse, interpret and critically evaluate information from a range of sources.

Syllabus

In this module, the aim is to integrate risk management as part of financial theory and practice. The three main risk concepts in the investment and corporate risk management field are: market risk (times series), credit risk (financial ratings) and operational risk (evaluation and reporting techniques). We introduce the mathematical tools required to quantify, describe and analyse these risks quantitatively (including graphic representation, bootstrapping, calculation of transition matrices, ARCH/GARCH models, VaR, and Monte-Carlo simulation). Finally, we introduce some programming tools in Excel and MatLab to demonstrate how to compute exposure to these risks. Topics: • Risk and the management of the firm. • Market mechanisms and efficiency. • Interest-rate risk. • Currency risk. • Equity and commodity price risk. • The behaviour of asset prices. • Risk assessment. • Controlling risk. • Quantifying financial risks. • Financial methods for measuring risk. • Qualitative approaches to risk assessment.

Learning and Teaching

Teaching and learning methods

Teaching methods include: Weekly lectures will provide an overview of the main issues arising in this module, and will be supplemented by weekly empirical and theoretical exercises. Exercises will support your learning by providing opportunities for you to attempt, and gain feedback on, numerical and problem-solving exercises. You will also have the opportunity for both directed and non-directed independent reading. Learning activities include: The module will be taught by a mixture of methods ranging from guided background reading, lectures, group work and the exploration of mini case-studies and datasets. The lecturer will draw upon market developments current at the time of the course. The lecturer will introduce the concepts, and you will have the opportunity to practice and apply the methods discussed. A step-by-step analysis of different risk measurements will enable deeper understanding of the subject material.

TypeHours
Independent Study126
Teaching24
Total study time150

Resources & Reading list

Hull (2009). Managing Financial Risk. 

Zvi Bodie, Alex Kane and Alan J. Marcus (2014). Investments. 

Assessment

Formative

Individual comments

Summative

MethodPercentage contribution
Class Test  (1 hours) 30%
Examination  (2 hours) 70%

Repeat

MethodPercentage contribution
Examination  (2 hours) 100%

Referral

MethodPercentage contribution
Examination  (2 hours) 100%

Repeat Information

Repeat type: Internal & External

Costs

Costs associated with this module

Students are responsible for meeting the cost of essential textbooks, and of producing such essays, assignments, laboratory reports and dissertations as are required to fulfil the academic requirements for each programme of study.

In addition to this, students registered for this module typically also have to pay for:

Textbooks

Recommended texts for this module may be available in limited supply in the University Library and students may wish to purchase the core/recommended text as appropriate.

Please also ensure you read the section on additional costs in the University’s Fees, Charges and Expenses Regulations in the University Calendar available at www.calendar.soton.ac.uk.

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