Master-Program Financial Management (MBA)

Course-Syllabus SS 2013

Professor/Lecturer: Prof. Dr. Victor J. Randall

Course Title: Applied Risk Management

This course is for students currently in the 4th semester of MBA Financial Management

COURSE OBJECTIVES

Students who are skilled at analyzing derivatives are in high demand in all of the financial centres
throughout the world. Applied Risk Management deals with the ways in which risks are quantified
and managed by financial and non-financial institutions, emphasizing terminology and concepts
used in financial risk management. Through case studies of recent financial disasters, the reasons
for the failures in risk management are analyzed. Students will be required to prepare a group
project during the semester and present it in class. Students need to read financial newspapers and
be aware of current affairs in politics, economics and general business.

There's no better way to understand risk management than to look at an example - real or imagined,
good or bad practice! Select a suitable ARM failure for academic purposes. A list of prominent
cases is available for perusal in my office, which require analysis from all facets of risk
management: Market risk Credit risk Liquidity risk Operational risk.

• Through some of the most prominent financial disasters recently and of the past two decades,
selected failures in risk management are reviewed in our course.
• You will be asked to work on an assigned project. The results will be presented by your team
and discussed in class. The project consists of a presentation plus a Q&A session.
• The course deals with the ways in which risks are managed and quantified by financial
institutions and industrial firms, emphasizing terminology and concepts used in risk
management and insurance.

You will be required to research the case by incorporating a broad range of literature / academic
resources. The case should include a description of the event, analysis of the reasons that caused
the failure, the consequences and the RM lessons learnt.

REQUIRED MATERIALS

Options, Futures, and Other Derivatives, 7/E

John C. Hull
Prentice Hall, 2010

Introduction to Risk Management and Insurance, 9/E

Mark S. Dorfman,
Prentice Hall, 2010

Risk Management and Insurance, 4/E

Scott Harrington & Gregory Niehaus
International Edition, Mc Graw-Hill/Irwin, 2011

Financial Risk Management: A practitioner’s guide to managing market and credit risk
Steven Allen,
John Wiley, 2003
EXAMINATION and GRADING

Your final grade is determined by your results based on the following three areas:
1. your regular presence in class (min. 80% punctual attendance of all ARM classes
and seminars)
2. my assessment of the depth of your command of the material presented in your
project assignment (essay & presentation) weighted 60% of final grade)
3. my assessment of the extent to which you helped to make the class a productive
learning experience (2 class participation marks weighted 40% of final grade)

The case should include a description of the event, analysis of the reasons that caused the
failure, the financial & other consequences and the RM lessons learnt.
The case study project (comprises 60% of grade) consists of two parts:
1. an essay of 8-10 pages delivered to me 1 week prior to your presentation date
2. a ppt.-presentation to be delivered on your assigned date
The case will be presented, reviewed and discussed in class. There will be a hand-out
questionnaire as class assignment on the date of your presentation.
It should be uploaded to the x-drive and saved in the ARM directory. It serves as a
summary for further study and review.

COURSE OUTLINE AND ASSIGNMENTS

Evaluation of Financial disasters I (Banking and Hedge Funds)

Read: Steven Allen, Financial Risk Management
Scott Harrington & Gregory Niehaus, Risk Management and Insurance, 2/e
John C. Hull, Options, Futures, and Other Derivatives, 7/E
Assignment: Group Project, Quiz

Study of historical incidents of financial failure due to breakdowns of risk management control
Derivatives Mishaps and what we can learn from them.
RM FAILURES CASE STUDIES – Part I (Banking: Barings, AIB, Lehman Bros., BCCI, LTCM)
Feature: “The International” Review and Class Discussion or “Wall Street”

Evaluation of Financial disasters II (Industry)

Read: Steven Allen, Financial Risk Management
John C. Hull, Options, Futures, and Other Derivatives, 7/E
Assignment: Group Project Global Risk Map 2013 and Airline Risk Analysis 2013

RM FAILURES CASE STUDIES – Part II (Industry: Worldcom, Enron, Orange County, etc.)
Analysis and Discussion
Question & Answer Session - Model questions
Feature: “Enron” Review and Class Discussion

Special requirements:
Part of our class time will be devoted to group work on special focus areas. To get the most out of
class, you need to prepare conscientiously for lectures and participate actively in class discussions.
A non-programmable financial calculator with mathematical & statistics functions is strongly
recommended.

VJR/ 17.1.2013