Course co-ordinator(s): Prof Andrew Cairns (Edinburgh).
Aims:
The aims of this course are:
- To provide a good grounding in the best practice of risk management within an organisation
- To understand economic measures of capital and capital allocation
- To have a thorough understanding of operational risk in its various forms
- To identify and measure risks and then to take actions to mitigate risks and exploit risky opportunities through good risk management strategies.
Detailed Information
Pre-requisites: none.
Location: Edinburgh.
Semester: 2.
Syllabus:
- Economic capital
- Economic measures of value and their uses in corporate decision making
- Capital allocation and the role of risk measures
- Operational risk
- Examples of operational risk
- Non-quantitative and quantitative methods and tools for managing operational risk
- Different ways of quantifying operational risk under Basel II
- Case studies
- Examples of past disasters and good practice and the lessons to be learned
- Risk analysis of real and hypothetical scenarios including non-quantifiable risks; views of different stakeholders
- Risk management and optimisation
- Articulating an organisation’s risk appetite and risk objectives; translating these into risk tolerances.
- Determining an organisation’s overall risk exposure
- How risks and risky opportunities affect the selection of strategy
- Developing and recommending strategies for risk optimisation
- Methods for transferring risk to other organisations including financial derivatives, securitisation, insurance, reinsurance, insurance-linked securities
- Techniques for managing credit risk
- Different types of securitisation
- Risk reduction within an organisation
- Advantages and disadvantages of different approaches to risk reduction; e.g. costs and benefits; information asymmetry; transparency; liquidity; basis risk; moral hazard
- Dynamic versus static hedging using financial derivatives; practical considerations
- Modern approaches to immunisation of interest-rate risk
- Asset-liability modelling
- Optimising risks and opportunities relative to the Board’s declared risk appetite and risk tolerances
- Risk management control cycle
- Describe typical risk management control cycles and explain the relevance of each component
Assessment Methods:
80% of the mark for the course will be from a written examination in semester 2; 20% of the mark will be from coursework towards the end of semester 2.
SCQF Level: 11.
Credits: 15.
Other Information
Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer
VISION: further information and course materials are available on VISION