Financial Risk Management and Public Pol

Pre-requisite Courses: SIPAU6500 - Quantitative Analysis I, and SIPAU6200 – Accounting or INAFU6022 – Economics of Finance or equivalent. The development of quantitative risk management by the financial industry has gone hand-in-hand with the growth of quantitative approaches to financial regulation. Since the global financial crisis, the interactions between industry best practices and regulation have grown even closer, reflecting both lessons learned (or not), the widening scope of regulation, and the now-central role of financial risk in the public policy agenda.

This course applies risk management principles within the context of public policy, presenting market, liquidity, and credit risk measurement techniques employed by banks and other intermediaries, along with their drawbacks and limitations. To help understand current approaches to risk management practice and regulation, the course examines financial market behavior in both normal times and crises, the treatment of firms and debt in bankruptcy—especially how it differs for financial firms—the role of securitization in the financial system, and the roles of leverage and of market and funding liquidity in times of calm and distress.

The course focuses on intuition and understanding, conveying quantitative and technical material primarily through graphical and numerical examples, while also introducing students to sources of financial and statistical data. It aims to provide students with:

• Mastery of basic quantitative market and credit risk management and the ability to apply these techniques in financial markets and to public policy issues in finance.
• An understanding of the goals and tools of financial institution and market regulation, as well as current changes and public policy issues in regulation.
• Enhanced general conversancy with, and appreciation of, financial models and data.

The course will largely consist of lectures, but students are encouraged to interrupt with questions, comments, and to share perspectives from their professional experience.