Financial Risk Management 2600-MFBRz2rkdiZRF
1. The concept of financial risk – classification and analysis:
• risk vs. uncertainty,
• acceptable risk,
• accumulation and segmentation of the risk area.
2. Types of risk and main areas of their occurrence:
• systemic and non-systemic risk,
• market risk, interest rate risk, currency risk, political risk,
• legal, operational, management, and financial risk.
3. Distribution of rates of return. Practical application of the normal distribution:
• the problem of "fat tails" and methods to address it,
• normal distribution vs. actual distribution of market rates,
• volatility of variance,
• historical and implied variance.
4. The concept of risk measures:
• volatility measures
• downside risk / hazard measures,
• sensitivity measures.
5. Risk calculation using:
• Value at Risk (VaR) indicator,
• Monte Carlo simulation method.
6. Application of derivative instruments for risk hedging:
• hedging operations,
• speculative operations,
• arbitrage.
7. Forward and futures contracts – analysis and valuation:
• futures contracts vs. forward contracts,
• contracts on interest rates, T-bills, and bonds,
• contracts on stocks and stock indices,
• currency contracts.
8. Swap transactions – analysis and application:
• interest rate swap (IRS),
• currency swap,
• cross-currency interest rate swap (CIRS).
9. Valuation of swap contracts.
10. Options – analysis and valuation:
• types of options,
• intrinsic value vs. time value of an option,
• put-call parity principle,
• binomial model,
• Black-Scholes model.
11. Factors influencing option prices and their calculation (The Greeks):
• Delta (impact of changes in the underlying asset price),
• Theta (impact of time remaining to expiration)
• Vega (impact of underlying asset volatility),
• Rho (impact of interest rates),
• option price sensitivity to other factors.
12. Application of options for risk hedging.
Type of course
Mode
Learning outcomes
* S5_W01 – the research methodology and terminology within the discipline of management and quality sciences and complementary disciplines (economics and finance, legal sciences), specifically for the area of financial management and accounting.
* S5_W02 – the principles, procedures, and practices concerning financial management in organizations, accounting, financial institution management, and financial institutions' strategies.
* S5_W03 – economic theories and models regarding the functioning of organizations and the economy as a whole.
* S5_W05 – complex technological, social, political, legal, economic, and ecological processes and phenomena, and their impact on financial decisions in organizations, the functioning of organizations, and the economy as a whole, including the principles of industrial property protection and copyright law.
*S5_W06 - the principles of creating and developing various forms of entrepreneurship on a domestic and global scale.
* S5_U01 – utilize the theory of management and quality sciences and complementary sciences (economics and finance, legal sciences) to identify, diagnose, and solve problems related to financial decisions in an organization and the management of financial institutions, selecting appropriate sources and adapting existing methods or developing new ones.
* S5_U02 – correctly interpret complex technological, social, political, legal, economic, and ecological processes and phenomena, and their impact on financial decisions in organizations, the functioning of organizations, and the economy as a whole, applying an appropriate selection of sources.
* S5_U06 – independently and collaboratively prepare analyses, diagnoses, and reports concerning complex and atypical problems related to financial management in organizations, accounting, financial institution management, and financial institution strategies, and present them in a communicative manner, also in English, using information and communication tools.
* S5_U08 – independently expand their knowledge of dynamic changes in financial markets and support others in understanding modern risk management methods.
* S5_K01 – evaluate and approach critically complex situations and phenomena related to financial management in organizations, accounting, management of financial institutions, and financial institution strategies.
Assessment criteria
Graded pass (Zaliczenie na ocenę): written research papers / projects.
Bibliography
Primary literature:
* Sopoćko A., Rynkowe instrumenty finansowe, PWN.
* Jajuga K., Jajuga T., Inwestycje, Wydawnictwo Naukowe PWN, Warszawa 2010.
Supplementary literature:
* Dębski W., Rynek finansowy i jego mechanizmy, Wydawnictwo Naukowe PWN, Warszawa 2010.
* Elton E.J., Gruber M.J., Brown S.J., Modern Portfolio Theory and Investment Analysis, John Wiley & Sons, New York, 2007.
* Fabozzi F.J., Rynek obligacji. Analiza i strategie, WIG-Press, Warszawa 2001.
* Francis J.C., Inwestycje. Analiza i zarządzanie, WIG-Press, Warszawa 2000.