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Unit of study_

FINC6023: Financial Risk Management

Semester 1, 2022 [Normal day] - Remote

Risk is an integral part of financial decisions. Following the rapid evolution of the discipline of financial risk management, analysts must be prepared to access the level of risk in the marketplace. This unit explores the basic concepts of modelling, measuring and managing financial risks within the regulatory framework. Topics covered include market risk (value-at-risk and expected loss), credit risk (single name, portfolio, ratings and market based models, credit derivatives), liquidity risk and operational risk. To overcome the rather quantitative nature of the topics, the unit relies heavily on practical based lab exercises with emphasis on simulations, real life examples and case studies.

Unit details and rules

Unit code FINC6023
Academic unit Finance
Credit points 6
Prohibitions
? 
None
Prerequisites
? 
FINC5001
Corequisites
? 
None
Assumed knowledge
? 

None

Available to study abroad and exchange students

Yes

Teaching staff

Coordinator Jiri Svec, jiri.svec@sydney.edu.au
Lecturer(s) Jiri Svec, jiri.svec@sydney.edu.au
Type Description Weight Due Length
Final exam (Record+) Type B final exam Final exam
Written exam with MCQ
40% Formal exam period 2 hours
Outcomes assessed: LO1 LO2 LO3 LO4
In-semester test (Record+) Type B in-semester exam Mid-semester exam
MCQ
20% Week 07
Due date: 04 Apr 2022 at 16:00
1 hour
Outcomes assessed: LO1 LO2 LO3 LO4
Assignment Report
Written report, individual or in small groups of 2-3.
40% Week 12
Due date: 16 May 2022 at 16:00

Closing date: 30 May 2022
10 pages (Approx. 2,500 words)
Outcomes assessed: LO1 LO2 LO3 LO4
Type B final exam = Type B final exam ?
Type B in-semester exam = Type B in-semester exam ?

Assessment summary

  • Report: Writing a report involving the estimation, forecasting and evaluation of portfolio risk measures.
  • Mid-semester exam: This is an online quiz covering material from the first four lectures in the semester. Multiple choice question format.
  • Final exam: This is a closed book exam consisting of multiple choice, short discussions and analytical questions covering all concepts covered during the semester.

Detailed information for each assessment can be found on Canvas.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a high distinction indicates work of an exceptional standard, a distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name

Mark range

Description

High distinction

85 - 100

Awarded when you demonstrate the learning outcomes for the unit at an exceptional standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Distinction

75 - 84

Awarded when you demonstrate the learning outcomes for the unit at a very high standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Credit

65 - 74

Awarded when you demonstrate the learning outcomes for the unit at a good standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Pass

50 - 64

Awarded when you demonstrate the learning outcomes for the unit at an acceptable standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Fail

0 - 49

When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see sydney.edu.au/students/guide-to-grades.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

  • Deduction of 5% of the maximum mark for each calendar day after the due date.
  • After ten calendar days late, a mark of zero will be awarded.

This unit has an exception to the standard University policy or supplementary information has been provided by the unit coordinator. This information is displayed below:

For every calendar day up to and including ten calendar days after the due date, a penalty of 5% of the maximum awardable marks will be applied to late work.

Academic integrity

The Current Student website  provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.  

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

You may only use artificial intelligence and writing assistance tools in assessment tasks if you are permitted to by your unit coordinator, and if you do use them, you must also acknowledge this in your work, either in a footnote or an acknowledgement section.

Studiosity is permitted for postgraduate units unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission.

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

WK Topic Learning activity Learning outcomes
Week 01 1. Introduction; 2. Objectives of risk management; 3. Introduction to types of risk Lecture (3 hr) LO1 LO2
Week 02 1. Value at risk (VaR); 2. Expected shortfall (CVaR) Lecture (3 hr) LO3
Week 03 1. VaR precision and time aggregation; 2. Backtesting of VaR 3. Liquidity (unwinding positions) Lecture (3 hr) LO2 LO3
Week 04 1. Portfolio VaR; 2. Analytical approach to VaR Lecture (3 hr) LO3 LO4
Week 05 1. Portfolio VaR; 2. Multivariate models; 3. Mapping, correlations and copulas Lecture (3 hr) LO3 LO4
Week 06 1. Forecasting; 2. Volatility; 3. Correlations Lecture (3 hr) LO3 LO4
Week 07 Mid-semester quiz Lecture (3 hr) LO2 LO3
Week 08 1. VaR methods; (Delta normal, historical simulation and Monte Carlo simulation) Lecture (3 hr) LO3 LO4
Week 09 1. Stress testing; 2. Scenarios; 3. Integrated risk management Lecture (3 hr) LO1 LO2 LO3 LO4
Week 10 1. Credit risk 1; 2. Ratings; 3. Default probabilities and credit default swap (CDS) Lecture (3 hr) LO2 LO3 LO4
Week 11 1. Credit risk 2; 2. Credit risk modelling; 3. Credit VaR Lecture (3 hr) LO2 LO3 LO4
Week 12 1. Financial crisis; 2. Structured products and securitisation; 3. Collateralised debt obligations (CDOs) Lecture (3 hr) LO1 LO2
Week 13 Summary, exam information, and assignment feedback Lecture (3 hr) LO1 LO2 LO3 LO4

Attendance and class requirements

Lecture recordings: Lectures will take the form of Zoom lessons, with live interaction and chat with students possible. Post-lecture, Zoom recordings will be posted to Canvas. Student attendance at all live Zoom lectures is highly recommended.

Please note the Business School does not own the system and cannot guarantee that the system will operate or that every class will be recorded. Students should ensure they attend and participate in all classes.

 

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

The following textbooks are used for reference throughout the course. Tutorial/Workshop Questions will be taken from these sources.

  • Value at Risk (3rd Edition) by Philippe Jorion.
  • Risk Management and Financial Institution (Fifth Edition) by John C. Hull.

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

At the completion of this unit, you should be able to:

  • LO1. identify and explain the characteristics of market, credit, operational, legal, regulatory and reputation risk
  • LO2. identify key financial risks in corporations
  • LO3. construct and evaluate risk management models
  • LO4. apply hedging techniques in managing market risk.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1 Depth of disciplinary expertise

Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.

GQ2 Critical thinking and problem solving

Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.

GQ3 Oral and written communication

Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.

GQ4 Information and digital literacy

Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.

GQ5 Inventiveness

Generating novel ideas and solutions.

GQ6 Cultural competence

Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.

GQ7 Interdisciplinary effectiveness

Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.

GQ8 Integrated professional, ethical, and personal identity

An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.

GQ9 Influence

Engaging others in a process, idea or vision.

Outcome map

Learning outcomes Graduate qualities
GQ1 GQ2 GQ3 GQ4 GQ5 GQ6 GQ7 GQ8 GQ9

This section outlines changes made to this unit following staff and student reviews.

The canvas site has been improved for clarity. Some of the course materials will be unpacked into 'topic' areas. More real-world discussion topics to take place in the Discussion Board.

Any additional information will be made through announcements on Canvas.

Additional costs

There are no additional costs for this unit

Site visit guidelines

There are no site visit guidelines for this unit.

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.