FINAN304-21B (HAM)

Financial Risk Management

15 Points

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Division of Management
School of Accounting, Finance and Economics

Staff

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Convenor(s)

Susanna Lu

Susanna Lu
4973
MSB.3.20
See Moodle
susanna.lu@waikato.ac.nz

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement/WIL Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: yilan.chen@waikato.ac.nz

You can contact staff by:

  • Calling +64 7 838 4466 select option 1, then enter the extension.
  • Extensions starting with 4, 5, 9 or 3 can also be direct dialled:
    • For extensions starting with 4: dial +64 7 838 extension.
    • For extensions starting with 5: dial +64 7 858 extension.
    • For extensions starting with 9: dial +64 7 837 extension.
    • For extensions starting with 3: dial +64 7 2620 + the last 3 digits of the extension e.g. 3123 = +64 7 262 0123.
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Paper Description

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The unifying theme in this paper is the application of modern finance theory to the financial decision making and management of financial institutions. The subject of decision making in financial institutions is approached from a risk perspective. This paper covers the major decision areas for financial institution management within the framework of a regulatory and "corporate responsible" environment. The main topics covered are various financial risks and their management including interest rate risk, credit risk, liquidity risk, foreign exchange risk and market risk within the international context.

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Paper Structure

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The paper will be taught through lectures and tutorials. Students’ performance will be evaluated by two individual assignments, Mid-term test, and the Final Exam.

There will be a 2-hour lecture and a 1-hour tutorial each week. Students should get prepared before attending the lectures and tutorials.
Note: Tutorials start from the second week. Each tutorial deals with learning materials from the previous week's lectures. Students are required to enroll in one of the tutorial groups during the first week of lectures.
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Learning Outcomes

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Students who successfully complete the paper should be able to:

  • Understand the economic functions of financial institutions in the economy, systemic risk and financial regulations. [LO1]
    Linked to the following assessments:
  • Understand how to measure interest rate risk and apply the repricing model and the duration gap model. [LO2]
    Linked to the following assessments:
  • Understand sources of foreign exchange risk exposure and how to use derivatives to hedge the risk. [LO3]
    Linked to the following assessments:
  • Understand how to measure market risk exposure using RiskMetrics, the historic approach, the Mote Carlo simulation approach, and the expected short fall approach.[LO4]
    Linked to the following assessments:
  • Understand how to measure credit risk using both qualitative and quantitative models, such as Linear Discriminant Models, RAROC Models, and Moody's Analytics Portfolio Manager Model.[LO5]
    Linked to the following assessments:
  • Understand the causes of liquidity risk and the common measures of liquidity risk exposure.[LO6]
    Linked to the following assessments:
  • Conduct effective asset, liability, and liquidity management [LO7]
    Linked to the following assessments:
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Assessment

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There will be two assignments, a Mid-term Test, and the Final Exam. To be eligible to pass this paper, students must achieve an overall grade of at least 50% in the whole paper.
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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 50:50. There is no final exam. The final exam makes up 50% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 50:50 or 0:0, whichever is more favourable for the student. The final exam makes up either 50% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. Assignment 1
13 Aug 2021
5:00 PM
10
  • Online: Submit through Moodle
2. Mid-term Test
20 Aug 2021
11:00 AM
30
  • In Class: In Lecture
3. Assignment 2
1 Oct 2021
5:00 PM
10
  • Online: Submit through Moodle
4. Exam
50
✔
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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The prescribed textbook is Anthony Saunders and Marcia Millon Cornett, “Financial Institutions Management: A Risk Management Approach”, 9th Edition, McGraw-Hill, 2018. You can read this textbook online from

https://ebookcentral-proquest-com.ezproxy.waikato.ac.nz/lib/waikato/detail.action?pq-origsite=primo&docID=5471217

Also please refer to the reading list:

https://rl.talis.com/3/waikato/lists/4CF81DAA-0E49-660C-15E7-D7EB35E55281.html?lang=en-US&login=1

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Online Support

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Moodle is the official communication platform for this paper. All relevant materials and documents including lecture recordings will be uploaded to Moodle. Announcements will be posted on Moodle from time to time to inform you of important notices, updates and other development pertaining to this paper. It is your responsibility to check these Announcements and updates via Moodle regularly, as ignorance of these is NOT a valid excuse.
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Workload

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For this 15-point paper, the expected workload is approximately allocated as follows:

35 hours: Attend lectures and tutorials

45 hours: Complete assignments (including textbook reading)

70 hours: Prepare for the test and exam (including textbook reading)

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Linkages to Other Papers

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Prerequisite(s)

Prerequisite papers: FINA201 or FINAN101 or FINAN200 or FINAN202

Corequisite(s)

Equivalent(s)

Restriction(s)

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