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Course Description and Scope

BF2210

Bank Risk Management

This course examines the identification, measurement, monitoring and control of risk within banking institutions. Our primary focus concerns the techniques banks use modify and reshape risk. We also consider several tools to measure risk, including Value at Risk. Finally, we examine regulatory

frameworks of supervision of financial institutions, both prior to and following the financial crisis of

2008.

The course uses several case studies to better understand how banking institutions manage

risk.

The course is quantitative in nature. Students are expected to know simple matrix computation

and be familiar with calculus.

assume you have proficiency in Excel, and encourage you to use Excel for the course assignments.

Some familiarity with bond valuation is also expected. Finally, I will

Note, there will be overlap between this class and BF2209 Derivatives Securities. Specifically, I will cover material similar to (1) derivative contracts covered in BF2209 Derivatives Securities, (2) how to use these contracts as hedging tools.

Course Objectives

1. Provide economic rationales for risk management and analyze the methods to assess risk in

banking institutions.

2. Analyze how banking institutions manage risk using on and off balance sheet techniques.

3. Discuss and debate recent events concerning banking institutions and their implications for

effective risk management.

Course Assessments

Components

Marks

Individual / Group

1. Assignments

20

Individual

2. Case studies

20

Group

3. Participation

10

Individual

4. Final examination

50

Individual

Total

100

 

Page 1

Distributed by Nanyang Business School, Nanyang Technological University. All Rights Reserved.

Assessment Plan

Course Learning Objectives

Assessment Method

1. Provide economic rationales for risk management and analyze the methods to assess risk exposure in banking institutions.

Participation, case studies, final exam.

2. Analyze how banking institutions manage risk using, case studies, on and off balance sheet techniques.

Participation, assignments, final exam.

3. Discuss and debate recent events concerning banking institutions and their implications for effective risk management.

Participation, case studies.

Textbook

Financial Institutions Management: A Risk Management Approach, Saunders and Cornett, Eight Editions (McGraw-Hill International Edition), 2014

Proposed Weekly Schedule

Week

Topic

1.

Fundamental issues of risk management

2.

Commercial banking business models - Asset-liability management

3.

No class

4.

Banking risk: Quantifying Interest rate risk

5.

Banking risk: Managing Interest rate risk

6.

Off-balance sheet approaches to interest rate risk management

7.

Banking risk measurement: Value at Risk

8.

Comparison of ALM and VaR approaches to risk management

9.

The role of securitization in asset liability management

10.

Banking risk: Credit Risk

11.

Banking risk: Liquidity Risk

12.

Banking risk: Operational risk and abuse of financial services

13.

Regulation as a force shaping the banking sector

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Distributed by Nanyang Business School, Nanyang Technological University. All Rights Reserved.