Financial Risk 2400-M2FiRRF
• The concept of risk and its importance for risk management in a financial institution, risk classification (liquidity, interest rates, currency, credit, operational and other). Legal regulations affecting financial risk management.
• Liquidity risk - traditional management methods: liquidity pool, asset-liability conversion, active liquidity management, German approaches.
• Liquidity risk – the measurement of liquidity risk: cash capital, liquidity ratios, core deposits, gap analysis. The model of liquidity in a bank, the ordinary and crisis situation.
• Market risk and its types. Interest rate risk - reasons and types, modeling of interest rates in a static approach (cubic spline models, Nelson-Siegel-Svensson model), introduction to random modeling of the evolution of the temporary rate, methods of measuring the interest rate risk (gap method - gap, limits, durations and its developments).
• Interest rate risk - duration and its interpretation, convexity, velocity. Special forms of durations for banking instruments: effective duration, elastic duration, example of stochastic duration.
• The possible purposes in interest rate risk management, dynamic changes in the yield curve, matching the position taken by the bank in order to limit the risk, the use of forward instruments to limit the risk.
• Currency risk - currency positions and limits, the reduction of position in portfolio preserving variance, banking supervision recommendations (Commission for Financial Supervision).
• Currency risk - using the value-at-risk measure (VaR) for currency positions. Characteristics of VaR and selected estimation methods (historical simulation and Filtered Historical Simulation, variance-covariance, GARCH and Monte Carlo). Specific methods of VaR Calculation (conditional VaR, VaR calculated from the tail of the distribution, etc.). Back-testing and stress-testing.
• The concept of credit risk and its significance. Differences between risk in financial institutions and enterprises. Pre-credit, credit and post-credit risk. The role of supervisory rules, with particular emphasis on the provisions of the New Basel Capital Accord (Basel II). Risk management: identification, measurement, modeling and monitoring of the risk.
• Measurement of pre-credit risk - assessment of the willingness to repay the liability (scoring and credit rating - differences) and financial ability to repay. Assessment of capital requirements. Indicator analysis of selected entities according to point tables (individual borrower and enterprise).
• Credit risk. The problem of information asymmetry in the selection of the loan portfolio, diversification of credit exposure. Impact of the level of credit risk on the bank's financial result (IAS 39). Credit migration models and default models (KMV Model, Risk Metrics, Credit Risk Plus, Credit Portfolio).
Type of course
Student has knowledge about types of financial risk (namely: liquidity, interest rate, currency and credit) basic method of measuring and managing the risk in financial institutions and enterprises. S2A_W03, S2A_W06, S2A_W11
Student can evaluate basic types of risk with simple models created in spreadsheet or simple econometric models. He or she is able to recognize the impact of regulatory requirements on risk assessment. Student can apply different risk measures to the purposes of risk analysis, for example to calculate the value at risk or to increase the net income of the investment without rapid growth of risk. Student can measure selected types of risk and limit their impact on the results and value of a financial institution. S2A_U01, S2A_U02, S2A_U03, S2A_U04, S2A_U06, S2A_U07, S2A_U08, S2A_U9
Student is aware of how risk management can reduce the regulatory capital requirements and ensure the compliance with risk standards. The student implements the final requirements on time. S2A_K01, S2A_K03, S2A_K04, S2A_K06, S2A_K07
The final exam consists of 10 “true/false” questions with explanation. At least 3 questions on the exam refers to the material from classes. Only explanations are assessed and summed up for the final grade. Students should pass the classes first to take the exam. The final grade consists of 20% of the classes grade and 80% of the final exam grade.
1. C. Alexander, “Handbook of risk management and analysis”, John Wiley and Sons, Chichester 2008
2. P. Best, "Wartość narażona na ryzyko", Wydawnictwo ABC, Kraków 2000
3. D. DeRosa, „Managing foreign exchange risk”, Irwin, Cambridge 1996
4. K. Jackowicz, „Zarządzanie ryzykiem stopy procentowej metoda duracji”, PWN Warszawa 1999
5. K. Jajuga, "Zarządzanie ryzykiem", PWN, Warszawa 2007
6. K. Jajuga, Z. Krysiak, "Ryzyko kredytowe wierzytelności hipotecznych", praca zbiorowa, Związek Banków Polskich, Warszawa 2004
7. Z. Krysiak, "Ryzyko kredytowe a wartość firmy", Oficyna Ekonomiczna, Kraków 2006
8. A. Saunders, „Metody pomiaru ryzyka kredytowego, Wydawnictwo Wolters Kluwers Polska, Kraków 2001
9. D. Uyemura, D. van Deventer, „Zarządzanie ryzykiem finansowym w bankach”, Związek Banków Polskich, Warszawa 1997
10. W. Żółtkowski, "Zarządzanie ryzykiem bankowym w praktyce", CeDeWu, Warszawa 2007
Information on level of this course, year of study and semester when the course unit is delivered, types and amount of class hours - can be found in course structure diagrams of apropriate study programmes. This course is related to the following study programmes:
- Finance, Investments and Accounting, part-time, second cycle
- Finance, Investments and Accounting, full time, second cycle
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: