BA4514 RISK MANAGEMENT
| Course Code: | 3124514 |
| METU Credit (Theoretical-Laboratory hours/week): | 3 (3.00 - 0.00) |
| ECTS Credit: | 6.0 |
| Department: | Business Administration |
| Language of Instruction: | English |
| Level of Study: | Undergraduate |
| Course Coordinator: | Assoc.Prof.Dr. ÇAĞRI TOPAL |
| Offered Semester: | Fall Semesters. |
Course Objectives
Recent events have brought risk management to the forefront of investing. The course is intended to study quantitative risk measurement and management from theoretical and practical perspectives.The first part gives an overview of understanding risk and quantitative risk measurement techniques basically. The course will be focusing on the established financial risks, namely credit, market and liquidity risks. Operational risk will also be addressed. After introducing each risk type, the techniques commonly used in risk measurement will be discussed. These techniques will include some advanced quantitative methods like Value-at-Risk and scenario analysis as well as more traditional measurement techniques such as duration and gap analysis. The second part is intended to be concerned with risk management and evaluation of financial decisions; topics include asset liability management, capital allocation, financial indices, liquidity management, market imperfections and performance evaluation. We will examine a number of notorious cases, review what regulators are doing about it, (the now famous Basel II and III Accord) and what you need to know to read and understand risk management reports. During the course of the semester, we will also discuss the recent global financial crisis as it relates to the topics covered in this course.
Course Content
The aim of the Risk Management and Insurance course is to provide an introduction to the actuarial philosophy and the actuarial scientific method. All major areas in risk and insurance are treated in some depth, including basic concepts, fundamental legal principles, property and liability insurance, life and health insurance, social insurance, the functional and financial operations of insurance companies, and the main features of the Turkish insurance market.
Course Learning Outcomes
Upon successful completion of this course, students should be familiar with the following subjects:
1. Introduction to Enterprise Risk Management
a) Financial markets and instruments - recap
b) Definition of risk and risk management
c) Rise of risk management - lessons from financial disasters
d) Types of risk
2. Enterprise Risk Management Application
a) Six Step Approach to ERM
i. Risk Identification
ii. Risk Assessment
iii. Risk Analysis
iv. Implementation
v. Monitoring
vi. Evaluation
b) Roles on the ERM process
i. The role of Executive Management
ii. The role of the Director
iii. The role of the Chief Risk Officer
iv. The role of Internal Audit
3. Market Risk
a) Definition of market risk
b) Sources and types of market risk
c) Foreign exchange risk
d) Interest rate risk
e) Other types of market risks
f) Measuring market risk
i. Duration
ii. Gap analysis
iii. Volatility
iv. Value-at-Risk
v. Scenario analysis and stress testing
4. Credit Risk
a) Definition of credit risk
b) Sources and types of credit risk
c) Measuring credit risk
i. Calculating risk exposure
ii. External credit ratings
iii. Default probabilities
iv. CAMEL rating model
v. Advanced methods - Credit VaR
d) Credit derivatives and their role in the current financial turmoil
5. Liquidity Risk
a) Definition of liquidity risk
b) Sources of liquidity risk
c) Measuring liquidity risk
6. Operational Risk
7. Risk Control
a) Asset Liability Management
b) Diversification - portfolio effect
c) Hedging using derivatives
d) Risk limits
e) Capital allocation
f) Risk adjusted performance measurement
Program Outcomes Matrix
| Level of Contribution | |||||
| # | Program Outcomes | 0 | 1 | 2 | 3 |
| 1 | They attain advanced level of knowledge in the functional areas of business administration such as strategic management, marketing, accounting, finance, organization management, human resources, and operations management. | ✔ | |||
| 2 | They are capable of identifying and analyzing legal, environmental and social factors, which influence the basic functional areas of the business administration. | ✔ | |||
| 3 | They understand and implement rational, systematic and scientific approaches effectively in problem solving and decision-making processes. | ✔ | |||
| 4 | They are capable of applying, analyzing, synthesizing and evaluating the knowledge they have in diverse fields efficiently | ✔ | |||
| 5 | They are capable of transferring information by using efficient verbal and written communication techniques. | ✔ | |||
| 6 | They are capable of performing professional communication effectively also in English. | ✔ | |||
| 7 | They know the methods of performing efficient teamwork. | ✔ | |||
| 8 | They are capable of following the contemporary techniques, scientific and technological developments in their fields and are able to conduct research and studies in order to develop their business administration related knowledge, skills, and competences. | ✔ | |||
| 9 | They are knowledgeable in the areas of professional ethics and responsibility. | ✔ | |||
| 10 | They are capable of utilizing their knowledge and skills efficiently in global and multicultural contexts. | ✔ | |||
| 11 | They are knowledgeable in the issues of environment, social responsibility, social justice, quality and cultural values | ✔ | |||
| 12 | They have a creative, innovative and critical perspective. | ✔ | |||
0: No Contribution 1: Little Contribution 2: Partial Contribution 3: Full Contribution