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 objective of the course is to provide an accurate presentation of the techniques and tools of financial risk management used by non-financial firms to maximize the firm's value. By the end of the course, students will become familiar with the basic concepts of corporate risk management, specifically concerning non-financial firms, and with the advantages and disadvantages associated with hedging strategies. In this perspective, part of the course is specifically dedicated to analyzing derivative instruments used for risk hedging. Therefore, by the end of the course, students will also acquire specific technical knowledge about these instruments, enabling them to identify the most effective instruments and strategies in relation to the firm's risk exposure.

The course 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 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 directly in class using Excel and based on the application of the major 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 and 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 the practice 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 groups 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 on 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

English