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Financial Institutions and Risk Management (FIN 5317):

Fundamental to the financial health and prosperity of financial institutions is the identification, measurement, pricing and management of key risks. The purpose of this course is to expose students to the key risks facing bank managers and the modern techniques for measuring, pricing and managing those risks.

Course Objectives

The collapse of several large financial institutions during the recent sub-prime mortgage crisis and credit crunch, illustrates the importance of risk management to the safety and profitability of commercial banks and other financial firms. The primary objective of this course is to develop an understanding how the concepts of value-at-risk, economic capital, and risk-adjusted return on capital can be used to measure, manage, and price various bank risks. A secondary objective of this course is to develop an understanding of the relationship between economic capital and the risk-adjusted capital requirements imposed upon upon banks by Basel II.

Topics

• The Basics of Risk Management at Financial Institutions
• The Concept of Value-at-Risk
• The Risk-Adjusted Return on Economic Capital
• The Measurement of Economic Capital
• The Application of Value-at-Risk, Economic Capital, and RAROC to the Measurement and Management of Market Risk, Credit Risk, Operational Risk and Loan Pricing.
• The Relationship between Economic and Risk-Adjusted Regulatory Capital Requirements under Basel II: The Standardized Approach, The Foundations Approach and the Advanced Internal Ratings Based Approach