This course is designed to help students to identify the six major risks of the financial industry as well as how to systematically manage these risks with financial derivatives and risk management models. Course content covers: risk identification, liquidity risk management (Basel III), forward contracts and futures contracts, interest rate futures, swaps, asset securitization and the 2007 credit crisis, options and value at risk (VAR).

The goal is to enable students to identify risks and choose appropriate tools to monitor risks. After completing the course, students should be able to calculate the settlement size of various derivatives contracts by maturity dates. Also, students should have the capability to initiate and quantify risk in order to make strategic recommendations for financial institutions.

Upon completion of this unit, students will be able to:

CLO1. Identify the six major risks in the financial industry.

CLO2. Calculate the maturity settlement size of forward contracts and futures contracts, interest rate futures, swaps and other derivative products.

CLO3. Be able to manage liquidity risk systematically.

CLO4. Identify the risks of asset securitization products.

CLO5. Use the value-at-risk model to estimate and manage risks.

Required Text

1. Anthony Saunders, Marcia Millon Cornett, Financial Institutions Management: A Risk Management Approach, 5th Edition, Posts & Telecom Press, 2009

2. John C. Hull, Options, Futures and Other Derivatives, 10th Edition, China Machine Press, 2020

Recommended Readings

1. John C. Hull, Risk Management and Financial Institutions, 4th Edition, China Machine Press, 2019

2. Walter V. “Bud” Haslett Jr, Risk Management, Foundations For A Changing Financial World, China Machine Press, 2019

3. https://www.bis.org/bcbs/basel3.htm Basel III: international regulatory framework for banks