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 the course is to provide a thorough overview of the techniques and tools of financial risk management used by non-financial firms to maximize firm value. By the end of the course, students will become familiar with the fundamental concepts of corporate risk management, with a specific focus on non-financial firms and particular attention to the advantages and disadvantages of hedging strategies.

In this perspective, part of the course is specifically dedicated to the analysis of derivative instruments used for hedging purposes. Therefore, by the end of the course, students will also acquire specific technical knowledge of these instruments, enabling them to identify the most effective tools and strategies for managing a 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; Capitoli: 1-2-3-5-6-7-10-11-12; ISBN (carta) 9781292212890

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

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

• Lectures will be primarily theoretical and delivered in a traditional classroom setting. However, theoretical sessions will be complemented by hands-on exercises conducted on computers using Excel, focusing on the practical application of topics related to the use of derivative instruments.

  The course concludes with the discussion of a case study, specifically designed to demonstrate, both practically and numerically, how hedging derivatives can be employed by non-financial firms to reduce risk exposure, and to compare the economic outcomes of using different types of derivative instruments.

• 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.

Italian

English