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The course will develop the analytical tools necessary to understand crisis prevention and management, and risk management. The properties and characteristics of risk management techniques will be analyzed and related to corporate and sovereign default risk, hedging and trading strategies, regulation, and assessing financial stability and systemic risk. Emphasis will be put on applying these techniques to problems emerging in the marketplace.
Registration into this compact course is open until the first day of the course. Poslední úprava: Schnellerová Dagmar, Ing. (14.02.2024)
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Participation in the lectures. Final exam. Grading in line with faculty decree on grading. Two lectures are taught usually during 3 days, course not taught this WS 24/25. The lectures are followed by an exam. Poslední úprava: Schnellerová Dagmar, Ing. (05.09.2024)
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Goodhart, C. and D. Tsomocos, The Challenge of Financial Stability, Edward Elgar. Goodhart, C. and D. Tsomocos, Financial Stability in Practice, Edward Elgar. Myint, S. and F. Famery, The Handbook of Corporate Financial Risk Management, Risk Books. Wessel, D. In FED We Trust: Ben Bernanke's War on the Great Panic, Three Rivers Press. Poslední úprava: Horváth Roman, prof., Ph.D. (14.03.2022)
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Topics to be covered include: the analytics of a financial crisis - the Great Depression; bank runs and the current financial crisis; case studies: Bear Stearns and Lehman Brothers; funding, interest rate and currency risk, and liquidity crises; bank resolution; modelling risky debt, systemic risk and default; VaR, CoVaR and other risk measures; elements of term structure of interest rate models and hedging applications; housing, mortgages, and the subprime market; the Goodhart-Tsomocos Model of Financial Fragility, and measure of systemic risk; the sovereign debt crisis and the Euro area bailout. Preliminary Syllabus Session 1 Course Introduction The Analytics of a Financial Crisis: The Great Depression · Basic facts on output, prices, labour markets · Hypothesis about causes · The role of financial factors Essential Reading Bernanke, B. and James, H. (1991) “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison”, chapter in Hubbard, R.G. (ed.) Financial Markets and Financial Crises, University of Chicago Press, pp.33-68. Search Oxford Libraries Online for print edition of this book The Economist, Financial Crises: The Slumps that Shaped Modern Finance, Essay. Freidman, M. (2006) “Why Money Matters”, Wall Street Journal, 17th Nov., A.20. Case Study To be handed out in class. Session 2 Bank runs and Bear Stearns · The Diamond-Dybvig Model · Bank Runs · The Demise of Bear Stearns Essential Reading Diamond, D.W. (2007) “Banks and Liquidity Creation: A Simple Exposition of the Diamond-Dybvig Model”, Economic Quarterly 93(2):189-200. Wessel, D. (2010) “Unusual and Exigent”, chapter 9 in In FED We Trust: Ben Bernanke's War on the Great Panic, Three Rivers Press, pp.147-175. Search Oxford Libraries Online for this book Case Study To be handed out in class. Session 3 Lehman Brothers and the Financial Crisis of 2007-09 · Lehman Brothers Sources of trouble and options Run Dynamics Controversial Decisions Policy Decisions and fallout · Effects on credit availability · Post Lehman problems · SpinCo – Bank Resolution Regimes Essential Reading Duffie, D. (2010) “The Failure Mechanics of Dealer Banks”, Journal of Economic Perspectives, 24(1):51-72. Wessel, D. (2010) “Let Ol’ Lehman Go” and “Breaking the Glass”, chapter 1 & 11 in In FED We Trust: Ben Bernanke's War on the Great Panic, Three Rivers Press, pp.9-26 & 118-126. Search Oxford Libraries Online for this book Friedman, M. (1998) “Reviving Japan”, Hoover Digest, 1998:2, Asia. Greenlaw, D., Hatzius, J., Kashyap, A.K. and Shin, H.S. (2008) Leveraged Losses: Lessons from the Mortgage Market Meltdown, Proceedings of the U.S. Monetary Policy Forum 2008, U.S. Monetary Policy Forum Report No. 2. Rosenberg Institute, Brandeis International Business School and Initiative on Global Markets, University of Chicago Graduate School of Business. Ivashina, V. and Scharfstein, D. (2008) “Bank Lending During the Financial Crisis of 2008”, Journal of Financial Economics 97(3):319-338. Krishnamurthy, A. (2010) “How Debt Markets Have Malfunctioned in the Crisis” Journal of Economic Perspectives, 24(1):3-28. HM Treasury (2013) RBS and the Case for a Bad Bank: The Government’s Review, HM Treasury, London. Available to download from gov.uk Ingves, S. et al. (2009) Lessons Learned from Previous Banking Crises:Sweden, Japan, Spain, and Mexico, Occassional Paper No. 79. Group of Thirty, Washington DC. Available to download from Group of Thirty Martini, L. et al. (2009) Bad Banks Finding the Right Exit from the Financial Crisis, McKinsey Working Papers on Risk. Available to download from Mckinsey Case Study To be handed out in class. Session 4 The Sovereign Debt Crisis and Euro Area Bailout · Greek and euro area history · Debt sustainability · Greece’s 2015 outlook · Euro break up mechanics · Cyprus Essential Reading Goldstein, M. (2003) Debt Sustainability, Brazil, and the IMF, Working Paper No. WP 03-1Institute for International Economics, Washington DC. Available to download from The Peterson Institute for International Economics Freidman, M. (1997) “The Euro: Monetary Unity To Political Disunity?”, Project Syndicate, 28th Aug., 1997 < Körner, K. (2011) Sovereign default probabilities online - Extracting implied default probabilities from CDS spreads, Global Risk Analysis, Deutsche Bank Research. Walker, M. (2012) “How a Radical Greek Rescue Plan Fell Short”, Wall Street Journal May 10, 2014. Available to print & view Wall Street Journal Online 3 part series by Peter Spiegel “How the euro was saved”, Financial Times 11, 14, 15 May 2014 Case Study To be handed out in class. Session 5 Corporate Risk Management: Funding Risk · Reasons for risk management · Funding as a risk · Funding and risk management issues during the 2008 crisis · Funding cost drivers Corporate Risk Management: Interest-rate Risk · Bond and interest-rate basic concepts · Yield curves · How to develop an interest-rate risk hedging policy Essential Reading Myint, S. and Famery, F. (2012) “Funding” and “Interest Rates and Inflation Risk”, parts 1and II in The Handbook of Corporate Financial Risk Management, Risk Books, pp.1-50 and 51-166. Ebook available on EBSCO Search Oxford Libraries Online for print version of this book Session 6 Market & Credit Risk, RWA and Capital Requirements for Derivatives – Part 1 Essential Reading Hull, J. (2012) Risk Management and Financial Institutions, 3rd ed., Wiley. Search Oxford Libraries Online for this book Session 7 Market & Credit Risk, RWA and Capital Requirements for Derivatives – Part 2 Essential Reading Hull, J. (2012) Risk Management and Financial Institutions, 3rd ed., Wiley. Search Oxford Libraries Online for this book Session 8 Corporate Risk Management: Interest-rate Risk · Quantifying the interest-rate risk · Asset and liability management · Optimal fixed-floating mix and duration Corporate Risk Management: Currency Risk · Three types of currency risk · Transaction risk management · Translation risk management Essential Reading Myint, S. and Famery, F. (2012) “Currency Risk”, part III in The Handbook of Corporate Financial Risk Management, Risk Books, pp. 166-237.
Poslední úprava: Horváth Roman, prof., Ph.D. (14.03.2022)
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