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Department of Financial & Management Studies (DeFiMS)

Risk management

Course Code:
15PFMC071
Unit value:
0.5
Taught in:
Term 1

This module is concerned with the decisions that financial firms (banks, investment fund management firms, etc.) make about the risk of their investment in portfolios of financial securities. It focuses on portfolios of tradable securities – especially equities, options and futures. Students will look at the decision tools financial firms use to achieve desired combinations of risk and return in their portfolios; those decision tools are derived from theoretical models of the nature of risk, and study these principles and their application.

Objectives and learning outcomes of the course

This course enables students to:

  • understand modern concepts of risk in financial investments
  • understand the tools of efficient portfolio management and their theoretical basis
  • understand the role of derivatives in managing portfolio risk
  • understand the use of risk measures in financial regulation and in the management of financial firms
  • apply and evaluate the principles through a 'case study' of managing a dummy market portfolio (including emerging markets of Asia or Africa)
  • use empirical evidence on the results of risk management techniques

Method of assessment

Assessment for this course is by one tutorial presentation at 10%; an essay of 4,000 words at 30%; an unseen written examination at 60% of the total grade; all elements except the presentation may be resubmitted

Suggested reading

  • EJ Elton, MJ Gruber, SJ Brown and WN Goetzmann, Modern Portfolio Theory and Investment Analysis, 8th ed., New York, Wiley, 2011.
  • JC Hull, Fundamentals of Futures and Options Markets, 7th ed., New Jersey, Prentice Hall, 2011.
    (Alternatively, you may use the more complete exposition, which is technically more advanced, in JC Hull, Options, Futures, and Other Derivatives, 8th ed., New Jersey, Prentice Hall, 2012).
  • M Crouhy, D Galai, R Mark, Risk Management, New York, McGraw Hill, 2001.
    (Alternatively, you may prefer to use the more concise textbook by the same authors: M Crouhy, D Galai, R Mark, The Essentials of Risk Management, New York, McGraw Hill, 2006).