Postgraduate Course: Introduction to Risk Management in Banks (CMSE11167)
Course Outline
| School | Business School |
College | College of Humanities and Social Science |
| Course type | Standard |
Availability | Available to all students |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Credits | 15 |
| Home subject area | Common Courses (Management School) |
Other subject area | None |
| Course website |
None |
Taught in Gaelic? | No |
| Course description | 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. |
Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
| Additional Costs | None |
Information for Visiting Students
| Pre-requisites | None |
| Displayed in Visiting Students Prospectus? | No |
Course Delivery Information
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| Delivery period: 2012/13 Semester 1, Available to all students (SV1)
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WebCT enabled: Yes |
Quota: None |
| Location |
Activity |
Description |
Weeks |
Monday |
Tuesday |
Wednesday |
Thursday |
Friday |
| No Classes have been defined for this Course |
| First Class |
First class information not currently available |
| Exam Information |
| Exam Diet |
Paper Name |
Hours:Minutes |
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| 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:
1. Knowledge and Understanding
After successfully completing the course the student will
&搬ave 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
&暉nderstand how different types of risks relate to items on a bank&孟 balance sheet
&搬ave an understanding of the causes and sources of these risks
&暉nderstand how to measure such risks and of the strengths and weaknesses of different measures
&暉nderstand strategies of how to manage certain of these risks
2. Cognitive Skills
On completion of the course a student will be able to
&暉se appropriate concepts to appropriate address the problem of how to measure the size of certain types of risk that banks face
&搏nterpret the meaning of values of different risk measures
&搪valuate assessments of risk given to a manager of a bank by specialists
3. Professional/subject specific/practical skills
On completion of the course a student will be able to
&暉se 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
&搏nterpret the meaning of these measures of risk
&搾ompute in simple terms the regulatory capital requirement for a bank
4. Transferable skills
During the course a student will develop skills to
&搾ommunicate complex technical issues coherently and precisely
&敬uantitatively analyse concepts concerning the nature of risks
&暈ork intensively and methodically to understand technical issues
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Assessment Information
Examination, 2 hours, 70%.
Assignment 30%
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Special Arrangements
| None |
Additional Information
| Academic description |
Not entered |
| Syllabus |
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&孟 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.
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| Transferable skills |
Not entered |
| Reading list |
Not entered |
| Study Abroad |
Not entered |
| Study Pattern |
Not entered |
| Keywords | Not entered |
Contacts
| Course organiser | Prof Jonathan Crook
Tel: (0131 6)50 3802
Email: |
Course secretary | Ms Samantha Rice
Tel: (0131 6)51 5332
Email: |
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