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Risk management and decision-making

The module takes an applied perspective, concentrating on decision-making in risky environments, which is of paramount importance to the finance industry.

Apart from identification of risk sources, the module offers a detailed analysis of tools and processes designed to manage these risks which are used by the financial industry. The latter is highly sought after in the financial industry.

Topics covered

  • The Capital Asset Pricing Model
  • Value at Risk
  • Volatility, Correlations and Copulas
  • Regulatory Risk
  • Market Risk
  • Credit Risk
  • Scenario Analysis, Stress Testing and Operational Risk
  • Liquidity Risk
  • Model Risk
  • ABSs, CDOs and, the Credit Crunch of 2007

Learning outcomes

If you complete the course successfully, you should be able to:

  • Describe and critically assess the processes through which companies make decisions in risky environments
  • Explain how financial instruments can be used to manage portfolio risk
  • Illustrate the following types of risk: credit, market, operational, reputational and regulatory
  • Compare risk databases and their management
  • Reason critically with respect to alternative risk management strategies
  • Assess best strategies according to an available set of information and adapt appropriate strategies once a set of information changes
  • Create the most suitable set of information for the decision-making process
  • Measure the following types of risk: credit, market, operational, reputational and regulatory
  • Professional financial tool skills and case study interpretation skills to support decisions
  • The ability to work both independently and in teams to create and manage financial strategies
  • The skills to present highly technical financial material to non-practitioners simply and clearly
  • Utilise real-time data to estimate the different sources of risk
  • Utilise financial tools and case studies to support strategic decisions
  • The ability to synthesise and use information and materials from a variety of different sources to support an argument
  • Research skills into risk management problems and the application of these in business decision-making

Assessment

This module is assessed by:

Coursework (30% weighting):

  • There is one item of coursework for this module which contributes to the final assessment mark forthis module:
  • Coursework: a written essay of a maximum of 2,000 or 2,500 words (deadline – weeks 9-12) The coursework is designed to check student progress, extend and reinforce concepts covered and also test individual performance.

Examination (70% weighting):

  • The final piece of assessment will be an unseen written examination of 2 hours’ duration.

Essential reading

The following is provided as part of the course materials after you register:

  • J.C. Hull, Risk Management and Financial Institution, John Wiley and Sons, 2015
  • S.L. Allen, Financial Risk Management, John Wiley and Sons, 2013
  • P. Jorion,Value at Risk, McGraw-Hill, 2006

Module author

Dr Leone Leonida, module leader

Dr Leone Leonida

PhD (Naples), PhD (York)

Dr Leonida’s researches the extent to which the predictive ability of the Early Warning Systems in forecasting systemic banking crisis is improved by variables capturing the concentration level in the banking sector, its securitization activity and mechanisms of systemic contagion. He is also studying the relationship between corporate investment and firms’ capital structure.

His research has been published in outlets including The Journal of Banking and Finance, The Oxford Bulletin of Economics and Statistics, The European Journal of Political Economy, and Empirical Economics.