Enrolled students are expected to have familiarity with basic concepts of capital markets and finance. The level of mathematical complexity involved in these topics will be manageable.

The aim of this course is to provide a thorough understanding of financial risk management techniques designed to maximize firm value. By the end of the course students are expected to be familiar with the economics of financial risk management, with specific reference to non financial corporations, as well as with the advantages/disadvantages of hedging strategies. A part of the course is devoted to the analysis of derivatives and their uses in risk management. Therefore, at the end of the course students should also be able to identify the main instruments and techniques used to hedge firm's risks by trading financial derivatives.

The Investment Analysis and Financial Risk Management course is made up of two modules: module a - Investment Analysis and module b - Financial Risk Management. Final assessment is one for the entire course.

The second module (module b - Financial Risk Management) is divided into three parts:

1. Concepts and the economics of Risk Management

2. Tools for Financial Risk Management

3. The practice of Risk Management

The first part of the course will address the general concepts of corporate risk management, trying to shed light on why firms (should) hedge. The second part is more technical and it will cover the tools for hedging risks; in particular, this part of the course discusses financial derivatives in the form of forwards, futures, swaps, options. The last part will help students understand how hedging strategies can be designed in practice and put into action to be effective.

(A); Hull, J. C.; Options, Futures and Other Derivatives; Pearson, Prentice Hall Upper Saddle River 2018; Chapters: 1-2-3-5-6-7-10-11-12; ISBN (print) 9781292212890

(C); Brealey, R., Myers S. and Allen F.; Principles of Corporate Finance; McGraw-Hill NY; 2023; Chapters: 21-22-27-28; ISBN (print) 9781264080946

The Professor will make materials used during the classes available on her web page (slides + exercises).

• The content of the course will be presented mainly through theoretical lectures. However, theoretical lessons will be interspersed with practical exercises carried out in class using Excel and based on the application of specific issues related to the use of derivatives. Furthermore, at the end of the course a case study is discussed; the specific goal of the case study is to understand how hedging strategies can be designed by taking advantage of financial derivatives and how different economic results can be reached by using alternative derivative contracts.

• The final exam is written. It will include multiple choice questions and a case study discussion. Multiple choice questions are aimed to assess the level of understanding of the theory and tools of corporate risk management, with specific reference to the use of financial derivatives; the case study discussion is intended to evaluate the individual ability to put in practice theoretical concepts of risk management to hedge risks in non financial corporations. Students attending the course are also required to carry out an assignment and present the results in class. The assignment is expected to be addressed in group and is aimed at evaluating the ability of students in collecting information and discussing specific topics related to corporate risk management. The final mark will be calculated as the average between the written exam's score and the working group discussion score. Overall, the criteria used to graduate the final mark will be approximately as follows:

  
  

  • knowledge and ability to apply the major formulas and calculations behind hedging strategies based on derivative contracts – case study discussion (about 25%)
  • knowledge of the fundamentals of corporate risk management and of financial operations based on derivative contracts - multiple choice questions (approx. 75%)

   

  It is not possible to consult books or notes. The exam is held in English.

English