Registry

Module Specifications

Current Academic Year 2012 - 2013
Please note that this information is subject to change.

Module Title Risk Modelling & Capital Management
Module Code EF5123
School DCUBS
Online Module Resources

NFQ level 8 Credit Rating 10
Pre-requisite None
Co-requisite None
Compatibles None
Incompatibles None
Description
The purpose of this module is to illustrate the various methods used to evaluate changing market, credit and operational risk, with special enphasis on the typical risk exposures of financial institutions and how such exposures are treated and regulated under existing International legislation.

Learning Outcomes
1. Adopt an enterprise-wide risk management perspective to generate value through risk management
2. Manage market, credit and operational risk in banking institutions
3. Use quantitative methods, including Monte Carlo simulations, to model the distribution of financial assets for risk measurement and management purposes
4. Explain the basic properties of industry standard models of market, credit and operational risk (e.g., the KMV model and CreditRisk+ in the credit risk domain)
5. Explain the regulatory environment related to market, credit and operational risk (e.g. role of rating agencies and regulations such as Basel II)
6. Use risk assessment as an input in capital allocation decisions



Workload Full-time hours per semester
Type Hours Description
Lecture48No Description
Tutorial20Guided solution of assigned problems
Seminars10Seminars of invited industry and academic speakers
Laboratory60Practice with creating workable risk models (e.g., writing risk management programs in Visual Basic)
Independent learning60Study of reference material (textbook, lecture notes and relevant academic
Examination52Revision for exam
Total Workload: 250

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities
The Rationale for Risk Management.
The shareholders’ perspective and value maximization; the role of market imperfections, information asymmetries and agency problems; real options; Enterprise Wide Risk Management (EWRM) and value creation..

Risk Modelling and Management in Non-Financial Firms.
Identifying and Quantifying Exposures; analysis of Currency and Price Exposure; measuring and managing exchange-rate and interest-rate risk; measuring and managing strategic risks; transfer pricing, payment for intangibles; implementation of risk management programme..

Risk Modelling and Management in Financial Institutions.
Risk Modelling and Management in Financial InstitutionsWhat’s special about financial institutions?; should financial institutions measure and manage risk?; identifying and quantifying exposures; credit, market and operational risks; risk measurement methodologies and models, value at risk (VaR), Riskmetrics, Riskgrades, mapping cash flows; advanced models of credit risk; liquidity and solvency risk; risk capital and its financing, economic capital; capital management and value creation, RAROC..

Numerical implementation of risk models.
Monte Carlo simulation methods to evaluate risk.

Systemic Risk Modelling and Management.
Financial stability, systemic risk and the regulator’s perspective on risk management; economic vs. regulatory capital, capital adequacy, evolution of capital standards; merits and limits of regulatory framework; regulatory arbitrage..

The regulatory environment.
The International regulatory framework defined by Basel II and Solvency II, EU directives and national legislation (mention) that implement these regulations, role of rating agencies.

Assessment Breakdown
Continuous Assessment50% Examination Weight50%
Course Work Breakdown
TypeDescription% of totalAssessment Date
Reassessment Requirement
Resit arrangements are explained by the following categories;
1 = A resit is available for all components of the module
2 = No resit is available for 100% continuous assessment module
3 = No resit is available for the continuous assessment component
This module is category 1
Indicative Reading List
  • Hull, J.: 2012, Risk Management and Financial Institutions, 3, Pearson,
  • Schroeck, G., Risk Management and Value Creation in Financial Institutions, Wiley 2002.: 0,
  • Saunders, A. and M. Millon Cornett, Financial Institutions Management: A Risk Management Approach, 5th edition, McGraw Hill 2006.: 0,
  • Crouhy, M., D. Galai, and R. Mark, Risk Management, McGraw Hill 2001.: 0,
Other Resources
None
Array
Programme or List of Programmes
MFCMMSc in Finance
PBSSAPG Exchange(Business School)
Timetable this semester: Timetable for EF5123
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