ECON 516 | Course Introduction and Application Information

Course Name
Economics of Risk and Institutional Risk
Code
Semester
Theory
(hour/week)
Application/Lab
(hour/week)
Local Credits
ECTS
ECON 516
Fall/Spring
3
0
3
7.5

Prerequisites
None
Course Language
English
Course Type
Elective
Course Level
Second Cycle
Course Coordinator -
Course Lecturer(s) -
Assistant(s) -
Course Objectives To teach students the fundamentals of risk management and its evolution over time.
Course Description The students who succeeded in this course;
  • will be able to define risk easily.
  • will be able to explain the concept of risk management.
  • will be able to compare the theories that has led to current risk management practices.
  • will be able to explain the macroeconomic and political risk and how to quantify these.
  • will be able to assess the balance sheets of nonbank corporates and banks from a risk perspective.
  • will be able to explain the functions of insurance sector in managing risk.
  • will be able to state how to utilise derivatives to manage every aspect of risk.
  • will be able to follow new developments in the field such as endogenous risk and exogenous risk.
Course Content The course focuses on the fundamentals of risk management and its evolution over time. It focuses on how to define, measure and manage risk by taking the students through a historical journey and introducing the heroes that contributed to the profession, from Bernoulli to Laplace, to Keynes, Kenneth Arrow, the father of risk management and derivatives. Later in the semester the course focuses on modern allocations of risk management with specific emphasis on company balance and bank balance sheets, operations of insurance companies etc. It concludes with tools to manage risk.

 



Course Category

Core Courses
Major Area Courses
X
Supportive Courses
Media and Management Skills Courses
Transferable Skill Courses

 

WEEKLY SUBJECTS AND RELATED PREPARATION STUDIES

Week Subjects Related Preparation
1 Risk Definitions, Risk Types and Risk Resources • Defining Risk (Glyn A. Holton) http://thegordian.net/wp-content/uploads/2006/10/risk.pdf • Types of Risks—Risk Exposures http://catalog.flatworldknowledge.com/bookhub/1?e=baranoff-ch01_s04
2 Risk theories • History of Finance (Merton H. Miller) • Risk, theory, reflection: Limitations of the stochastic model of uncertainty in financial risk analysis (Barry du Toit )
3 Institutional Risk Management Rethinking risk management (René M. Stulz)
4 Risk Analysis in Economics Systemic Risk And The Macroeconomy: An Empirical Evaluation http://www.nber.org/papers/w20963
5 Risk Analysis in Finance • The Challenges of Risk Management in Diversified Financial Companies (Christine M. Cumming and Beverly J. Hirtle) • How do global investors differentiate between sovereign risks? The new normal versus the old, Marlene Amstad, Eli Remolona and Jimmy Shek
6 Risk Measurement Models and Techniques Quantitative Risk Management: Concepts, Techniques and ToolsAlexander J. McNeil Rudiger ¨ Frey Paul Embrechts
7 Application of Risk Measurement • Volatility, Correlation And Tails For Systemic Risk Measurement (Christian T. Brownlees and Robert Engle) • Credit risk measurement: Developments over the last 20 years (Edward I. Altman, Anthony Saunders)
8 Mid-Term
9 Risk Analysis of Non Finance Sectors Management of non-financial risks http://www.bis.org/publ/othp04_8.pdf
10 Risk Management Applications of Non Finance Sectors • Non-financial risk assessment in mergers, acquisitions and investments (Erik Allenstr¨om and Fredrik Njurell) • Financial and Non-Financial Business Risk Perspectives –Empirical Evidence from Commercial Banks (Khizer Ali, Akhtar and Sadaqat)
11 Risk Analysis of Finance Sectors • Systemic Risk Analysis of Turkish Financial Institutions with Systemic Expected Shortfall, İrem Talaslı • Systemic risk in the financial sector: An analysis of the subprime-mortgage financial crisis, Martin F. Hellwig
12 Risk Management Applications of Finance Sectors • Excess Credit Risk and Bank’s Default Risk An Application of Default Prediction Models to Banks from EME , C.J. Godlewkski • Econometric Measures Of Systemic Risk In The Finance And Insurance Sectors, Monica Billio, Mila Getmansky, Andrew W. Lo, Loriana Pelizzon
13 Risk Management by using derivatives • Derivatives usage in risk management by U.S. and German non-financial firms: A comparative survey, Bodnar, Gordon M.; Gebhardt, Günther • Electricity derivatives and risk management, S.J. Denga, and S.S. Oren
14 Derivatives Applications for Risk Management • Dynamic Risk Management of Commodity Operations: Model and Analysis Sripad K Devalkar Ravi Anupindi, Amitabh Sinha • Introduction To Derivatives And Risk Management, D Chance, R Brooks
15 Presentations and Delivery of Projects
16 Review of the Semester  

 

Course Notes/Textbooks
Suggested Readings/Materials

 

EVALUATION SYSTEM

Semester Activities Number Weigthing
Participation
16
10
Laboratory / Application
Field Work
Quizzes / Studio Critiques
Homework / Assignments
Presentation / Jury
1
20
Project
1
40
Seminar / Workshop
Oral Exams
Midterm
1
30
Final Exam
Total

Weighting of Semester Activities on the Final Grade
70
Weighting of End-of-Semester Activities on the Final Grade
30
Total

ECTS / WORKLOAD TABLE

Semester Activities Number Duration (Hours) Workload
Theoretical Course Hours
(Including exam week: 16 x total hours)
16
3
48
Laboratory / Application Hours
(Including exam week: 16 x total hours)
16
Study Hours Out of Class
16
3
Field Work
Quizzes / Studio Critiques
Homework / Assignments
10
Presentation / Jury
1
15
Project
1
Seminar / Workshop
Oral Exam
Midterms
1
24
Final Exam
35
    Total
135

 

COURSE LEARNING OUTCOMES AND PROGRAM QUALIFICATIONS RELATIONSHIP

#
Program Competencies/Outcomes
* Contribution Level
1
2
3
4
5
1

To improve and deepen actual and advanced level knowledge in economics in the level of expertise by inventive thoughts and/or research and to get inventive contributions to science.

X
2

To comprehend the interaction between economics and related fields; to achieve inventive results by using knowledge requiring expertise in analysis, synthesis and evaluation of new and complex ideas.

3

To be able to apply the advanced level knowledge acquired in economics and finance.

X
4

Creating new knowledge by combining the knowledge of financial economics with the knowledge coming from other disciplines and also be able to solve problems which requires expert knowledge by applying scientific methods.

X
5

To be able to critically evaluate the knowledge in financial economics, to lead learning and carry out advanced level research independently.

X
6

Being able to use a foreign language for both following scientific progress and for written and oral communication.

X
7

To be able to develop new strategic approaches for unexpected, complicated situations in financial economics and take responsibility in solving it.

X
8

To be able to use computer programs needed in the field financial economics as well as information and communication technologies in advanced levels.

9

To possess the communication network to put the economic and social needs of the region of residence on the agenda.

X
10

To have adequate social responsibility and conciousness about the needs of society and to have the experience and authority  to organize and support the operations that can affect and drive  the social dynamics when necessary.

11

To be able to think analytically to identify problems in financial economics and to be able to make policy recommendations in economics and finance based on scientific analysis of issues and problems.

X
12

To protect the social, scientific and ethical values at the data collection, interpretation and dissemination stages and to be able to introduce and supervise these values.

13

To be able to use the skills of modeling, empirical analysis and formulating policy options that are developed for financial economics, in interdisciplinary contexts.

*1 Lowest, 2 Low, 3 Average, 4 High, 5 Highest