Units

---

Sample subject outline - Semester 1 2013

Note: Subject outlines often change before the semester begins. Below is a sample outline.

Rationale

This unit is part of the Finance Masters and greatly expands your previous knowledge in the area of risk. It is devoted to make you focus more on the downside (loss) rather than the upside (profit), taking into account the lessons learned from the global financial crisis. The course will be accessible to mathematically challenged students with no more than a basic understanding of calculus, matrix algebra, and statistics.

Aims

Not promoting a set way of thinking about risk, this unit aims to provide a comprehensive treatment of a range of techniques for measuring market risk and credit risk by financial institutions. Emphasis will be on the Value at Risk (VaR) measurement advocated by the IRB approach of BIS Accord.

Objectives

Course Learning Goals (Postgraduate)

The QUT Business School has established the Assurance of Learning (AOL) Goals to meet contemporary industry needs and standards. Achieving these learning outcomes will assist you to meet the desired graduate outcomes set at QUT - aligned with other internationally renowned business schools. Students will develop the following capabilities relevant to a contemporary global and sustainable business environment:

Have knowledge and skills pertinent to a particular discipline (KS)
1.1 Well-researched knowledge and critical understanding applied to issues at the forefront of a specialised discipline area
1.2 Ability to select and use effectively a range of tools and technologies to locate and/or generate information appropriate to the disciplinary context

Be critical thinkers and effective problem solvers (CTA)
2.1 Apply logical, critical and creative thinking and judgement to generate appropriate solutions to problems in the disciplinary context

Be professional communicators in an intercultural context (PC)
3.1 Ability to create and present professional documents and/or reports using high levels of analysis/synthesis/evaluation for a range of contexts and audiences
3.2 Ability to orally communicate and justify ideas and information, at a professional level, for a variety of contexts and audiences, including peers and discipline specialists

Be able to work effectively in a Team Environment (TW)
4.1 Operate effectively and with flexibility to achieve common goals in collaborative settings, using a range of skills, including leadership, negotiation, reflection, proactivity and support for team members

Have a Social and Ethical Understanding (SEU)
5.1 Apply knowledge of the ethical, social and cultural dimensions relevant to business situations, including appropriate standards or codes of practice, to provide courses of action

Unit Objectives:
On completion of this subject students should be able to:

1. Address practical risk measurement problems faced by financial institutions
2. Explore advanced techniques: delta normal, historical simulation, Monte Carlo simulation, default probability estimation, stress testing, and backtesting
3. Deal with non-normality: understand the impact of alternative distribution assumptions on risk measurement.
4. Have awareness of the virtues and limitations of various risk measurement techniques currently available
5. Report value at risk of a trading and lending portfolios in accordance with BIS agreement.

The specific course learning goals and unit objectives that apply to this unit are shown in the assessment section of this unit outline.

Content

Topics covered in the unit are:

Module 1: Introduction to Risk - risk, probability, impact, loss, opportunity, risk types, and time-varying volatility.
Module 2: BIS Accord - Basel Accords, capital requirements, risk weighted assets, capital adequacy ratios.
Module 3: Value at Risk (VaR) - delta-normal, historical simulation, Monte Carlo simulation.
Module 4: Reality Check - back testing, scenario analysis, stress testing.
Module 5: Credit risk - probability of default, worst-case default rate, loss given default, expected loss, credit VaR.

Approaches to Teaching and Learning

The approach taken to learning in this course is based on the belief that students learn best from experience by applying content matter to real data. Hence, every concept that is discussed in the lecture will be applied to real data in the laboratory. In addition, to significantly improve your essay writing skills, targeted opinion-writing workshop will be held throughout the semester.

Classes
The unit materials are conveyed to you weekly in a formal two-hour lecture plus two-hour laboratory workshop.

Assessment

Students will receive feedback in various forms throughout the semester which may include:

Informal: worked examples, such as verbal feedback in class, personal consultation

Formal: in writing, such as checklists (e.g. criteria sheets), written commentary

Direct: to individual students, either in written form or in consultation

Indirect: to the whole class

Assessment name: Mid-semester Examination
Description: This exam consists of a mix of computation and essay questions.
Length/Duration: 2 hours
Formative or Summative: Formative and Summative
Relates to objectives: Unit objectives: 1, 2, 3, 4 and AOL goals: KS (1.1), (1.2), CTA (2.1), PC (3.1)
Weight: 33%
Internal or external: Internal
Group or individual: Individual
Due date: Week 6

Assessment name: Project and Presentation
Description: Each group will prepare their answer to a project, which will be provided to you in approximately week 4. The group will be required to prepare and submit their annual risk report (of a financial institution) to the regulator.
Length/Duration: TBA (maximum)
Formative or Summative: Summative
Relates to objectives: Unit objectives: 1, 2, 3, 4, 5 and AOL goals: KS (1.1), (1.2), CTA (2.1), PC (3.1), (3.2), TW (4.1)
Weight: 33%
Internal or external: Internal
Group or individual: Group
Due date: Week 12

Assessment name: End of Semester Examination
Description: This exam consists of a mix of computation and essay questions.
Length/Duration: 2 hours
Formative or Summative: Summative
Relates to objectives: Unit objectives: 1, 2, 3, 4 and AOL goals: KS (1.1), (1.2), CTA (2.1), PC (3.1)
Weight: 34%
Internal or external: Internal
Group or individual: Individual
Due date: Week 13

Academic Honesty

QUT is committed to maintaining high academic standards to protect the value of its qualifications. To assist you in assuring the academic integrity of your assessment you are encouraged to make use of the support materials and services available to help you consider and check your assessment items. Important information about the university's approach to academic integrity of assessment is on your unit Blackboard site.

A breach of academic integrity is regarded as Student Misconduct and can lead to the imposition of penalties.

Resource materials

Prescribed Text
Hull, Risk Management and Financial Institutions (2nd edn.). Pearson.

Other Resources
Risk Management Magazine: < www.riskmanagementmagazine.com.au/ >
Global Association of Risk Professionals (GARP): < www.garp.com/resources/articles.aspx?ekmensel=c580fa7b_52_60_154_1\ >
The Risk Doctor: < www.risk-doctor.com >

All lecture slides, readings, tutorial questions, and other handouts provided during the semester will be available online through the unit's Blackboard site or through the library.

Risk assessment statement

There are no out-of-the-ordinary risks associated with lectures or tutorials in this unit. You should, however, familiarise yourself with evacuation procedures operating in the buildings in which you attend classes and take the time to
view the Emergency video.

Disclaimer - Offer of some units is subject to viability, and information in these Unit Outlines is subject to change prior to commencement of semester.

Last modified: 04-Oct-2012