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Risk Management
Instructor: Prof. Santanu K Ganguli


Course Description: Risk management involves defining the level of risk a firm desires to undertake, identifying the risk level it currently has and using derivative or other financial instrument to adjust the actual risk to the desired level. At operating level it encompasses a trade-off between choice of fixed and variable cost structure to earn a target operating profit with minimum volatility. From financial standpoint this may involve use of an optimum mix of debt and equity, portfolio of asset selection, use of derivative contracts in respect of commodity, equity, debt instrument,currency , interest rate and so on to reduce and assume acceptable (target )risk level.

Learning Outcome – At the end of the course the participants will be able to –
Ø Understand the role of various derivatives instrument in active risk management.
Ø Grasp Trading strategies involving derivatives with an aim to reduce or eliminate risk
Ø Get insight into various risk management methods.
Ø Get a basic exposure to various credit derivative instruments.
Ø Compute price of risk mitigation strategies.
Pre-requisite- Reasonably good understanding of financial management, quantitative and statistical methods.

Topic	Session
Introducing the subject and recapitulation of leverage and portfolio and their role in risk assumption and mitigation	1
Derivative contracts – forward, futures, option and swap with particular emphasis on hedging. Different market players – hedger, arbitrageur and speculators. Currency Derivative.	2 & 3
Hedging Strategies using futures. Market mechanism. Margin, margin call, Basis risk, computing minimum variance hedge ratio, hedging an equity portfolio.	4 and 5
Interest rates, Forward rate agreement , Bond portfolio, duration based hedging, immunization	6
Plain Vanilla Swap	7
Trading Strategies involving option from risk mitigation perspective	8
Greek Letters and VaR	9& 10
End Term Examination

1) Class participation 10%
2) Quiz 30%
3) Assignment 20%
4) End term 40%
Suggested Readings :

Fundamentals of Futures and Option Market by John C Hull (Latest Edition)

Important Notes :The course is quite technical. Participants are instructed to bring the text book and scientific calculator in the class without fail. They must be conversant with log and exponential function. There will be absolutely ‘zero tolerance’ in respect of plagiarism and any form unfair practice in examination. Use of mobile phone and laptop computers is strictly prohibited inside class room.

Created By: Alora Kar on 07/14/2016 at 10:33 AM
Category: MBA(Exe.)16-T-III Doctype: Document