Postgraduate Course: Risk Management and the Basel Accords (CMSE11165)
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 charge of the risk function in banks have to have a knowledge of how to measure and predict the amount of operational, credit and market risks the bank faces and how these amounts affect the amount of regulatory and economic capital a bank should retain to protect depositors and the market from unexpected events. Such a manager would also need to know how to allocate that capital between functions within the bank. The aim of this course is to give the student a detailed technical knowlege and understanding of how to do this using the latest methodologies. |
| Course description |
After completing this course, students will have knowledge of how to estimate probability of default (PD) for corporate loans based on spreads and on structural models; knowledge of what loss given default means; an understanding of how portfolio credit risk models predict credit risk; knowledge of how simulations and stress tests are carried out and of strengths and weaknesses of VaR; an understanding of what operational risk is and how to measure it; a deep conceptual understanding of how to compute the Basel II and III capital requirements in terms of credit, market, operational and liquidity risk; an understanding of the strengths and weakness of the aforementioned techniques/approaches; a critical view on Basel Accords and banking regulation.
Syllabus
Credit Risk - Capital Market Models
Credit Risk - Portfolios Models
Basel Accords - definitions
Basel II & Basel III
Basel Accords - credit risk
Basel Accords - market risk
Basel Accords - operational risk
Basel Accords - liquidity risk
Basel Accords and banking regulation - a critical view
Student Learning Experience
The conceptual points will be illustrated by means of practical examples in lectures and tutorials. The topics studied in lectures will be reviewed in tutorials. Students will be challenged to identify limitations of the techniques used in the financial market and to think what can be improved. Potential ways of overcoming the identified limitations will be discussed in lectures and tutorials.
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Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
|
Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
Information for Visiting Students
| Pre-requisites | None |
| High Demand Course? |
Yes |
Course Delivery Information
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| Academic year 2015/16, Available to all students (SV1)
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Quota: None |
| Course Start |
Semester 2 |
Timetable |
Timetable |
| Learning and Teaching activities (Further Info) |
Total Hours:
150
(
Lecture Hours 20,
Seminar/Tutorial Hours 8,
Summative Assessment Hours 2,
Programme Level Learning and Teaching Hours 3,
Directed Learning and Independent Learning Hours
117 )
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| Assessment (Further Info) |
Written Exam
70 %,
Coursework
30 %,
Practical Exam
0 %
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| Additional Information (Assessment) |
Exam, 2 hours, 70% (Date: TBC)
Assignment (individual case study based on an actual case): 30% (submission deadline: 16/03/2016) |
| Feedback |
All students will be given at least one formative feedback or feedforward event for every course they undertake, provided during the semester in which the course is taken and in time to be useful in the completion of summative work on the course. Such feedback may be at course or programme level, but must include input of relevance to each course in the latter case.
Feedback on formative assessed work will be provided within 15 working days of submission, or in time to be of use in subsequent assessments within the course, whichever is sooner. Summative marks will be returned on a published timetable, which has been made clear to students at the start of the academic year.
Students will gain feedback on their understanding of the material when they discuss their answers to the tutorial questions in the tutorials. Students may also ask questions in Lectures to assess their knowledge. |
| Exam Information |
| Exam Diet |
Paper Name |
Hours & Minutes |
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| Main Exam Diet S2 (April/May) | Risk Management and the Basel Accords | 2:00 | |
Learning Outcomes
On completion of this course, the student will be able to:
- Critically interpret assessments of liquidity, operational, credit and market risk.
- Apply models to assess different types of risk within banks.
- Critically review assessments of liquidity, operational, credit and market risk.
- Critically discuss the importance of risk evaluation and of the uncertainties and complexity of the methods that can be used.
- Critically discuss how to compute the Basel II and III capital requirements and the techniques for computing economic capital and allocating capital between activities.
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Reading List
Resti, A., Sironi, A. (2007). Risk Management and Shareholders' Value in Banking. John Wiley & Sons (Main textbook).
Bessis, J (2010). Risk Management in Banking. John Wiley & Sons, 3rd ed.
Alexander, Carol (2009). Value-at-Risk Models, Volume IV. John Wiley & Sons.
Myerson, Roger B. (2014). Rethinking the Principles of Bank Regulation: A Review of Admati and Hellwig's The Bankers' New Clothes. Journal of Economic Literature, 52(1), pp. 197-210.
Admati, A., Hellwig, M. (2013). The Bankers' New Clothes - What's Wrong with Banking and What to Do about it. Princeton and Oxford: Princeton University Press. |
Additional Information
| Graduate Attributes and Skills |
Subject Specific Skills:
After completing this course, students should be able to:
- Use appropriate techniques to evaluate the risk of a portfolio of assets using VaR;
- Use capital market models to compute the PD for specific corporate exposures;
- Compute unexpected loss using portfolio models; and
Compute the regulatory capital requirement for a bank given specific inputs. |
| Keywords | Not entered |
Contacts
| Course organiser | Dr Fernando Moreira
Tel: (0131 6)51 5312
Email: Fernando.Moreira@ed.ac.uk |
Course secretary | Miss Ashley Harper
Tel: (0131 6)51 5671
Email: Ashley.Harper@ed.ac.uk |
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