• Wallmeier Martin

• Wallmeier Martin

• Ceresa Tim
• Perreten Thomas Daniel

This course deals with measuring and managing financial risks. We analyze how risk management creates value for non-financial and financial institutions, and how valuable risk management strategies can be devised. The focus of the course is not on derivative valuation or technicalities but on the use of derivative instruments. We look at risk management from the perspective of managers rather than traders. Part of the course is based on Excel case studies. 

Preliminary table of content:

1. The role of risk management and derivatives
   1. Types and sources of risk
   2. Creating value with risk management
   3. The risk management process
   4. Purposes and benefits of derivatives
2. Derivatives valuation
   1. Options
   2. Forwards and futures
   3. Swaps
   4. Structured financial products
3. Risk management applications of derivative strategies
   1. Option strategies
   2. Forward and futures strategies
4. Measuring and managing market risk
   1. Risk measures
   2. A closer look at Value at Risk
   3. Framework for aggregating risk
   4. Estimation approaches
      1. Delta-Normal
      2. Historical simulation
      3. Monte Carlo Simulation
   5. Scenario analysis and stress testing
5. Measuring and managing credit risk
   1. Introduction to credit risk
   2. Ratings and rating transitions
   3. Structural models of default
   4. Reduced form hazard models
   5. Default correlations and credit portfolio risk
6. Learning from malpractice: snapshot presentations

Chance, D.M. (2020): Financial Risk Management – An End User Perspective, World Scientific

CFA (2017): Derivatives, CFA Institute Investment Series, ed. W.L. Pirie, Wiley

Hull, J.C. (2018): Risk Management and Financial Institutions, 5th ed., Wiley

Jacque, L.L. (2015): Global Derivative Debacles, 2nd ed., World Scientific

Written exam of 90 min.

The grade will be based on two elements: 1. a short presentation “Snapshot: What you need to know about ...” (1/3) 2. the final exam of 90 minutes (2/3). The first element is voluntary and only considered if the grade is higher than the grade of the final exam. The topics of the “Snapshot” presentations will be given in class.

Since the presentation is voluntary, the exam mode of this course is not considered a continuous evaluation.

Written exam of 90 min.

The grade will be based on two elements: 1. a short presentation “Snapshot: What you need to know about ...” (1/3) 2. the final exam of 90 minutes (2/3). The first element is voluntary and only considered if the grade is higher than the grade of the final exam. The topics of the “Snapshot” presentations will be given in class.

Since the presentation is voluntary, the exam mode of this course is not considered a continuous evaluation.