AI2138 Perspectives on Risk Management 7.5 credits

• Educational level

  Second cycle

• Academic level (A-D)

  D

• Subject area

• Grade scale

  A, B, C, D, E, FX, F

• Course page on KTH Social

Learning outcomes

The course objective is to provide students with insights as to how risk management impact the operations of financial and real estate commercial entities. The knowledge is important in understanding how risk management can be used to decrease the impact of unforeseen events in financial and real estate firms. The course consists of four modules that form a basis of discussion. Risk management in financial institutions, syndication and the role of investment banks and venture capital funds, public policy in promoting risk capital and the role of financial authorities are all vital parts in understanding risk management.

The student should be able to:

• Understand how risk can be controlled through internal risk management programs.
• The difference between operational risk, credit risk and portfolio risk.
• Understand how investment banks and venture capital handles risk.
• Explain the effects of syndication on handling risks in the venture capital industry.
  Determine the role of public policy in promoting risk capital.
• Understand the limitations of public policy in promoting risk capital.
• Explain the role of Basel II in regulating the banking industry in Europe.
• Discuss how modern financial regulation functions and the role of financial supervision.

Course main content

The course is based on four different aspects of the handling of risk in financial institutuions.

1. Risk management systems in financial institutions:
   Risk management system refers to the complex systems in which financial institutions such as banks and insurance companies measure and handle risks.
2. Syndication and the role of investment banks and venture capital funds in the financial system:
   Syndication is an important way of distributing the financial risk between different actors in the financial system. Investment banks, venture capital firms and commercial banks are all important actors within the financial system. Their role and functioning in the financial system will be analyzed in detail.
3. Public policy in promoting an adequate supply of risk capital in the economy:
   Throughout the Western economies different public policies have been launched to increase the supply of risk capital. These policies will be analyzed and the pros and cons of different approaches will be discussed.
4. The role of financial authorities in supervising the financial risk of different types of institutions:
   Since the financial system is vital for every national economy, and the internationalizion of financial intermediaries continues to grow, most new rules are international in nature. We will analyze how different financial authorities deal with the issue of supervising financial risks in different institutions and organizations.

Eligibility

 7,5 credits in Financial Investments and 7,5 credits in Corporate Finance or equivalent.

Literature

Peter Bernstein (1998), Against the gods, Wiley.

A number of research articles will be added to each module. These are determined in the course.

Examination

• SEM1 - Seminar, 3.0 credits, grade scale: P, F
• TEN1 - Examination, 4.5 credits, grade scale: A, B, C, D, E, FX, F

Offered by

ABE/Banking and Finance

Contact

Björn Berggren, tel: 08-790 8658, e-post: bjorn.berggren@abe.kth.se

Examiner

Björn Berggren <bber@kth.se>

Version

Course plan valid from: Spring 11.
Examination information valid from: Spring 10.