RISK MANAGEMENT   [Archived Catalog]
2023-2024 Graduate & Professional Studies Catalog


Minimum Credits: 3
Maximum Credits: 3
This course examines financial risk management from the perspective of the corporate manager. We will examine three issues. The first is why a corporation should manage risk. To understand this, we need to consider how corporations create value for shareholders and the frictions they face that create wedges between what the corporation produces and what is ultimately passed through to shareholders. The second issue is how a corporation should manage risk. This requires an understanding of certain financial instruments that are generally referred to as derivatives - instruments whose values derive from other more fundamental assets such as commodities, currency exchange rates, stocks (equities) and bonds (interest rates). The building blocks for many of these financial instruments are two basic derivative instruments, forwards/futures and options. The third issue is the cost of risk management. We will start by pricing forwards/futures and options under the assumption that markets are efficient and there is no arbitrage. We will then use Monte Carlo simulation as a tool for pricing more exotic derivatives.
Academic Career: Graduate
Course Component: Lecture
Grade Component: Grad LG/SNC Basis

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