Postgraduate Course: Introduction to Risk Management in Banks (CMSE11167)
Course Outline
| School | Business School |
College | College of Humanities and Social Science |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Availability | Available to all students |
| SCQF Credits | 15 |
ECTS Credits | 7.5 |
| Summary | Managers in a risk function in banks must understand the nature and sources of risks that depositors, equity holders and debt holders are subject to. The aim of this course is to give the student a detailed knowledge of the nature of these risks, how to measure the exposure that a bank has to such risks and an understanding of some ways in which such risks can be managed by a bank. |
| Course description |
Lecture 1 Risks of Financial Intermediation
Interest rate risk, market risk, credit risk, off balance sheet risk, technology risk, foreign exchange risk. Sovereign risk, liquidity risk , insolvency risk.
Lecture 2 Interest Rate Risk
Maturity model, duration model, repricing model.
Lecture 3 Market Risk
Market risk measurement, JPM's Riskmetrics Model, Regulatory models.
Lecture 4 Credit Risk: Individual Loan Risk
Types of loans, return on a loan, retail versus wholesale decisions, measurement of credit risk, default risk models
Lecture 5 Credit Risk: Loan Portfolio and Off Balance sheet Activities
Concentration risk, applications of portfolio theory. Off balance sheet activities and solvency, returns and risks of off balance sheet activities, settlement risk, affiliate risk.
Lecture 6 Foreign Exchange Risk
Foreign exchange rate volatility and exposure, FX trading, foreign asset and liability positions. Including hedging and multi foreign asset-liability positions.
Lecture 7 Sovereign Risk
Credit risk versus sovereign risk, debt repudiation versus debt, rescheduling, country risk evaluation.
Lecture 8 Technology and other Operational Risks
Sources of Operational risk, technological innovation and profitability, impact of technology on financial service production, effect of technology on revenues and costs, testing for economies of scale and scope, empirical findings on economies of scale and scope, technology and the evolution of the payments system, other operating costs.
Lecture 9 Liquidity Risk, Liability and liquidity risk management
Sources of liquidity risk, liability side and asset side liquidity risk, unexpected deposit decreases and bank runs, deposit insurance, liquidity risk and life insurance companies. Liquid asset management, liquid asset portfolio, risk-return trade-off for liquid assets, liability management, choice of liability structure,.
Lecture 10 Capital Adequacy
Capital and insolvency risk, Leverage ratio, Basel II: standardised approach, IRB approach.
Lecture 11 Loan sales and Collateralisation
Definition and types of loan sales, reasons for loan sales, methods of converting on balance sheet assets to securitised assets, the Pass-Through security, collateralised mortgage obligations, MBBs, strips.
|
Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
|
Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
Information for Visiting Students
| Pre-requisites | None |
Course Delivery Information
|
| Academic year 2014/15, Available to all students (SV1)
|
Quota: None |
| Course Start |
Semester 1 |
Timetable |
Timetable |
| Learning and Teaching activities (Further Info) |
Total Hours:
150
(
Lecture Hours 20,
Seminar/Tutorial Hours 9,
Summative Assessment Hours 2,
Programme Level Learning and Teaching Hours 3,
Directed Learning and Independent Learning Hours
116 )
|
| Assessment (Further Info) |
Written Exam
70 %,
Coursework
30 %,
Practical Exam
0 %
|
| Additional Information (Assessment) |
Examination, 2 hours, 70%.
Assignment 30%
|
| Feedback |
Not entered |
| Exam Information |
| Exam Diet |
Paper Name |
Hours & Minutes |
|
| Main Exam Diet S1 (December) | Introduction to Risk Management in Banks | 2:00 | |
Learning Outcomes
On completion of this course, the student will be able to:
- Knowledge and Understanding
After successfully completing the course the student will
o have a knowledge of the nature of different types of risks that banks face: interest rate risk, market risk, credit risk, foreign exchange risk, sovereign risk, liquidity risk and insolvency risk
o understand how different types of risks relate to items on a bank's balance sheet
o have an understanding of the causes and sources of these risks
o understand how to measure such risks and of the strengths and weaknesses of different measures
o understand strategies of how to manage certain of these risks
- Cognitive Skills
On completion of the course a student will be able to
o use appropriate concepts to appropriate address the problem of how to measure the size of certain types of risk that banks face
o interpret the meaning of values of different risk measures
o evaluate assessments of risk given to a manager of a bank by specialists
- Professional/subject specific/practical skills
On completion of the course a student will be able to
o use certain quantitative techniques to assess the magnitude of interest rate risk, market risk, credit risk, foreign exchange risk sovereign risk, liquidity risk and insolvency risk
o interpret the meaning of these measures of risk
o compute in simple terms the regulatory capital requirement for a bank
- Transferable skills
During the course a student will develop skills to
o communicate complex technical issues coherently and precisely
o quantitatively analyse concepts concerning the nature of risks
o work intensively and methodically to understand technical issues
|
Reading List
| Saunders, A & Cornett, M (2011) A Financial Institutions Management: A Risk Management Approach. McGraw Hill, 7th ed. |
Additional Information
| Graduate Attributes and Skills |
Not entered |
| Keywords | Not entered |
Contacts
| Course organiser | Dr Fernando Moreira
Tel: (0131 6)51 5312
Email: Fernando.Moreira@ed.ac.uk |
Course secretary | Miss Malgorzata Litwinska
Tel: (0131 6)51 3028
Email: Maggie.Litwinska@ed.ac.uk |
|
© Copyright 2014 The University of Edinburgh - 12 January 2015 3:40 am
|
University Homepage