Study Programmes 2016-2017
WARNING : 2015-2016 version of the course specifications
Financial Risk Management
Duration :
30h Th
Number of credits :
Master in economics : general (120 ECTS)5
Master in management (120 ECTS)5
Lecturer :
Georges Hübner
Language(s) of instruction :
English language
Organisation and examination :
Teaching in the first semester, review in January
Units courses prerequisite and corequisite :
Prerequisite or corequisite units are presented within each program
Learning unit contents :
This advanced finance course provides an overview of the risk management function and scope in a financial institution, and reviews the main financial risks: Market Risk, Interest-Rate Risk, Credit Risk, Operational Risk, Liquidity Risk... Basic risk management concepts will also be detailed (stochastic processes, hedging, Greeks, duration, dependence and copulae, Value-at-Risk...)

A) Foundations of Financial Risk Management A. 1. The scope of financial risk management A. 2. Creating value with risk management A. 3. Principles of hedging
B) Derivatives and Risk Hedging B. 1. Derivative securities and markets B. 2. Hedging linear exposures/instruments B. 3. Hedging options
C) Hedging Fixed Income Instruments C. 1. Yield curve dynamics C. 2. Duration and convexity C. 3. Duration hedging C. 4. Interest rate derivatives
D) Regulation and risk management D. 1. The need for RM in financial institutions D. 2. The Basel regulatory process D. 3. Basel III D. 4. Comprehensive Assessment
E) Quantitative market risk models E. 1. Value-at-Risk E. 2. VaR characteristics E. 3. Portfolio VaR E. 4. Historical VaR systems E. 5. Monte-Carlo VaR systems  E. 6. Expected Shortfall
Appendix 1: Modified VaR Appendix 2: EVT VaR
F) Credit, Operational and Liquidity risks, and Stress tests F. 1. Fundamentals of Credit Risk F. 2a. Default Probabilities F. 2b. Credit Rating Systems F. 3. The Copula model F. 4. Operational Risk F. 5. Liquidity Risk F. 6. Stress tests
Appendix 1: Leading credit risk models
An introductory lecture is organized at the beginning of the course with a guest speaker occupying a function of Chief Risk Officer (CRO) or equivalent in a prominent financial institution. Other external guests (financial consulting experts) will also share their knowledge and experience in risk management.
To illustrate and practise the concepts, a set of interactive exercise sessions will be organized in the computer and virtual trading room of HEC-ULg. Furthermore, case studies representing virtual market situations will be analyzed during these exercises sessions.
Learning outcomes of the learning unit :
The course pursues two main objectives: 1. To provide students with the body of knowledge necessary to understand the challenges of financial risk management, with a strong quantitative focus, and to possibly prepare a professional certification in the area of risk management; 2. To train students to the application of risk management concepts in realistic situations through exercises sessions in the trading room and case studies
Intended Key Learning Outcomes:
Gaining the knowledge and understanding of one of the proposed fields of concentration
Integrate autonomously researched information, tools, knowledge and context to build and propose, either individually or as part of a team, original, creative and viable solutions to concrete complex management problems, whether real or simulated, taking into account, when necessary, the human, social and legal context.
Ability to speak 2 foreign languages: C1 in English
Creative conception of solutions
Professional capacity for written communication
Faced with a management problem, suggesting solutions that are ethical and socially responsible and that respect the principles of good governance.
Prerequisite knowledge and skills :
- Financial Derivatives (or equivalent) - Investments and Portfolio Management (or equivalent) A solid background in probability theory, statistics and econometrics is required.
Planned learning activities and teaching methods :
- Theory sessions (including illustrations and practical examples)
- Presentations by external guest experts
- 4 x 2 hours of exercise sessions in the Trading Room, featuring: a. the appropriation of a risk management software
b. the resolution of practical exercises involving the measurement and evaluation of financial risks as well as the identification of most appropriate management/hedging decisions
c. the resolution of a virtual case study (practical assignment)
Mode of delivery (face-to-face ; distance-learning) :
Theory + Exercise sessions (sessions in the Trading Room included)
Assignment (graded)
Recommended or required readings :
Powerpoint presentations (available on the university's website lol@). John C. Hull's book "Risk Management and Financial Institutions" (Pearson Educ. Edition).
Assessment methods and criteria :
The final assessment will be in several parts:
  • written exam
  • practical assignment
Work placement(s) :
Organizational remarks :
Contacts :
Teacher Georges Hübner N1, Office 111 04/2327428 Assistant   Thomas Bonesire N1, Bureau 111