Risk Management

SM82.07: Risk Management [3 Credits]
Semester: August


An investment institution or a bank will primarily focus on mitigating the risk, as it is too costly. Minimizing the cost of risk to an optimum level means, increasing the value of an entity. However, risk transfer also has a cost and the objective is to minimize this cost while at the same time minimizing the risk. The course will expose the participants to various risk management concepts, tools and techniques in global context. The participants at the end of the course must be able to
• Identify and distinguish various kinds of risks
• Effectively handle a comprehensive risk management issue using relevant tools and techniques.
• Analyse and implement a risk management practice for a bank / institution
• Comfortably handle the various instruments used in risk mitigation
• Manage risk through hedging and Asset and Liability Management (ALM).

Catalog Description:

Derivatives, Risk Management, Asset Management, Liability Management

Pre-requisite(s): None

Course Outline:

I. Identification of risks

  • Risk and Return
  • Risks of financial intermediation
  • Enterprise risk management
  • Interest rate risk
  • Market risk
  • Credit risk
  • Off balance sheet risk
  • Technology and operational risks
  • Liquidity risks
  • Sovereign risks
  • Foreign exchange risk

II. Risk mitigation methods / instruments

  • Insurance
  • Options
  • Futures and forwards
  • Caps, floors, collars
  • Swaps
  • Securitization
  • Value at Risk (VaR)


Michel Crouhy, Dan Galai, and Robert Mark:
Risk management, New York, McGraw-Hill, 2006.

Lecture notes and handouts provided by the instructor.

Reference Books:

Saunders, A. and M. Cornett:
Financial institutions management: A risk management approach, New York, McGraw-Hill (6th edition), 2008.

Harrington, S. and G. Niehaus:
Risk management and insurance, New York, McGraw-Hill (2nd edition), 2008.

Steve L. Allen:
Financial risk management: A practitioner's guide to managing market and credit risk, Hoboken, NJ, Wiley, 2003.

Journals and Magazines:

Journal of risk
Journal of risk management
Applied journal of Corporate Finance
Journal of Banking and Finance
Journal of Economic Studies
Journal of Asset Management
Harvard Business Review.

Grading System: The final grade will be computed from the following constituent parts: mid-term exam (30%), final exam (40%),assignments (30%). Open/closed-book examination is used for both mid-term and final exam.

Instructor(s): Visiting Faculty