Course Outline

AY-2024-25

Program: (√ )
Course Title
Academic Term
MBA
Financial Engineering & Risk Management Term I ☐ Term II ☐ Term III ☐
MBA-DBM (√) Term IV ☐ Term V Term VI ☐
MBA- HHM

Functional Area Finance & Accounting Core ☐ Elective

Course Coordinator Prof. Bharati Singh Teaching Members 1

Course Revision Record

Version Version Date Recommendation

Credit 1.5 Contact 15 Learning Office 9.30am-

Hours Hours Hours 6.00pm

Contact Details [email protected]

Course Email

Course Descriptor

Course The purpose of this course is to provide the students with an overview of different types of
Overview risk an organization may face and to equip them with the knowledge of quantifying the risk
(200 words) and to manage those risks by using various financial instruments to hedge them. The students
will also learn from some of the most famous financial failures that occurred when these
risks were overlooked. Finally, the students will know why regulatory compliances by firms
are required.

Prerequisites/ The students have earlier enrolled for the course Investment Analysis and Portfolio
Co-requisites Management. The students are assumed to have a fair understanding of various statistical
distribution, particularly the normal distribution.

Learning 1) To identify different types of Financial Risks an organization may face.

Objectives 2) To learn various measures to quantify Financial Risks.
3) To understand why the regulatory compliance is required at large.
4) To contemplate a future career as Risk Manager in an organization.

PLO (PLC 2) Students should be able to identify the problem clearly, analyse it and decide from various
solutions they have. The classroom participation and group assignment will ensure that the
students will be able to communicate their decision both in oral and written format.

Teaching The concepts will be discussed in the classroom, and numerical problems will be solved.
Methods One case and one simulation exercise have been assigned for this course, and they will be
discussed according to the course outline.

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 Course Outline
AY-2024-25

For Internal Use Only

Instructional
Session Topic Reading and Case
Methodology

Refer Institutional policies to procure materials

Text Books No specific textbooks have been prescribed for the course; however, carefully
selected chapters from the reference materials will be assigned periodically to enrich
your understanding and deepen your engagement with the subject.

Other Reference Books:

Books and (1) A Practical Guide to Risk Management CFA Institute
Materials (2) Options, Future & Other Derivatives | John C Hull & Sankarshan Basu | 10th
Edition
(3) Financial Risk Management for Dummies, Wiley Finance
(4) Risk Management and Financial Institutions: Fourth Edition, John C. Hull, Wiley
Publication.
(5) Mathematics & Statistics for Financial Risk Management, Second Edition,
Michael B. Miller, Wiley Publication.
(6) Financial Risk Management, Allan M. Malz, Wiley Finance

Refer Institutional policies to procure materials

Cases The 2007-2008 Financial Crisis: Causes, Impacts and The Need For New
Regulations, Product Number: 908N14-PDF-ENG
Refer Institutional policies to procure materials

Reading If it is research paper (journal Article) students are requested to read only the selected
pages. This will be communicated by the teaching instructor in advance. However, if
the below reading is from Newspaper or from the Magazine (The Economists), the
students are requested to read the article in entirety.
1. Samuelson, C. A. (1996). The fall of Barings: Lessons for legal oversight of
derivatives transactions in the United States. Cornell Int'l LJ, 29, 767.
Copyright© Indian Institute of Management Bodh Gaya.
Prior permission must be obtained from Indian Institute of Management Bodh Gaya for use in any other purposes.
 Course Outline
AY-2024-25

2. Hull, J. C., and A. White (1998), “Value at Risk When Daily Changes in
Market Variables Are Not Normally Distributed”, Journal of Derivatives,
Vol. 5, pp: 9-19 [Note: Only the selected pages have to be read which will be
told by the instructor in advance.]
3. Gorton, G. (2009), "The Subprime Panic", European Financial Management,
Vol. 15, No. 1, pp: 10-46

Simulations ---
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Evaluation Components Marks PLO Assessed

Quiz 20 PLO 2a
End-Trimester Exam 40 PLO 2b (W)
Group Assignment and PPT 30 PLO 2b (O), PLO 2b (W), PLO 3

Class Participation 10 PLO 1, PLO 2b (O)

Total 100 Marks
Refer academic policies and procedures handbook

Course Expectation Students are expected to go through the readings, or the cases assigned for that
from the students session.

Refer academic policies and procedures handbook

Academic Standard Academic dishonesty (as defined by the PGP Manual IIM Bodh Gaya) will not be
and Honesty tolerated and shall be dealt with the most severe manner.
In promoting a high standard of academic integrity, IIM Bodh Gaya broadly
defines scholastic dishonesty—basically, all conduct that violates this standard,
including any act designed to give an unfair or undeserved academic advantage,
such as: (i) Cheating, (ii) Plagiarism, (iii) Unauthorized Collaboration, (iv)
Falsifying Academic Records, (v) Misrepresenting Facts, and (vi) Any other acts
(or attempted acts) that violate the basic standard of academic integrity.
Refer Program Specific manuals

Other Relevant ---

Information

Refer Program Specific policy manuals

Grading or Evaluation tools other than Examinations

Course policies

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Prior permission must be obtained from Indian Institute of Management Bodh Gaya for use in any other purposes.
 Course Outline
AY-2024-25

Please refer student guidelines

1. Assignment Schedule

Announcement
Assignment/Presentation/Case Discussion Due Date/Session
Session
It will be a group assignment. It has two main components -
----(i) Confirming the various statistical properties of a
5 security or portfolio under consideration, and (ii) Identify
the various types of risks a company can face, and
strategies to manage those risks.

Course requirements
Students are required to come prepared for each session by reading the respective reference material given in
this course plan.

Copyright© Indian Institute of Management Bodh Gaya.

Prior permission must be obtained from Indian Institute of Management Bodh Gaya for use in any other purposes.
 Course Outline
AY-2024-25

For Internal Use Only

Detailed Session Plan (Compulsory)

Session Assignments
No:
Topic Reading and Case
Due
Introduction to Financial Engineering & Risk
Management
• Different types of Financial Risk: Market
Risk, Credit Risk, Liquidity Risk, and
1 Operational Risk
• Overview of Risk Management Process
• Importance of Financial Risk
Management.
Risk Measurement Technique (VaR)
• To understand, compute, and interpret
Value at Risk
• Calculating VaR using various
2-3 methodologies: Variance-Covariance
Method, Historical Method (Basic
Historical Simulation Approach, and Age-
Weighted Historical Simulation Approach).

4 Back Testing of VaR

Credit Risk
• Managing credit Risk.
• Estimating Default Probabilities.
5-6
• CVA and DVA.

Basel Norms
• Major difference between Basel I and Basel
7 II
• The three pillars of Basel II
• Basel III
The 2007-2008
FINANCIAL CRISIS:
Review of the famous financial failure and
8 CAUSES, IMPACTS
discussion on Regulations.
AND THE NEED FOR
NEW REGULATIONS
9 Monte Carlo Simulation Analysis
After the 10th
session and
10 Enterprise Risk Management
before the
final exam.

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Prior permission must be obtained from Indian Institute of Management Bodh Gaya for use in any other purposes.