Risk Management
MBA
454.08
COB 22E
Fall 2011
Monday 6.00 – 8.50 PM
|
|
|
|
|
Edmondson-Miller Chair Katie School |
Office: +1 309 438-7993 Office Hours: Monday |
|
|
Graduate Assistant Shasha Bao E-mail: sbao@ilstu.edu |
Description:
This course will cover the notions of risk, choice, and risk management from primarily a corporate perspective. Corporations face a number of risks including market, technological, operational, political, legal and financial risks. Viewing the organization as a bundle of risks, this course will provide a perspective on how the risks are selected, financed, and managed; the management of risk includes the avoidance, reduction, and transfer with tools including debt, equity, options, insurance, reinsurance and derivatives. Participants will gain an understanding of the theory and issues relevant to the management of pure and speculative risks. Participants will have a chance to discuss the issues and practises surrounding risk management.
|
Recommended Reading: Banks, Erik (2004), Alternative Risk Transfer: Integrated Risk Management through Insurance, Reinsurance and the Capital Markets, John Wiley & Sons Brown, Gregory W. and
Donald H. Chew, editors, (1999), Corporate Risk: Strategies and
Management, Risk Books |
|
|
Bernstein, Peter (1998), Against
the Gods: The Remarkable Story of Risk, John Wiley and Sons Chapman, Robert J. (2006). Simple tools and techniques for enterprise risk management. Wiley Crouhy, M., D. Galai, et al. (2001). Risk Management. New York, McGraw-Hill. Doherty, N. A. (2000). Integrated Risk Management: Techniques and Strategies for Managing Corporate Risk. Boston, McGraw-Hill. Doherty, N. A.
(1997). "Financial Innovation in the Management of Catastrophe Risk."
Journal of Applied Corporate Finance 10(3): 84-95. |
 |
|
Froot, K. A., D. S. Scharfstein, et al. (1993). "Risk Management: Coordinating Investment and Financing Problems." Journal of Finance 48: 1629-58. Froot, K. A., D. S. Scharfstein, et al. (1994). "A Framework for Risk Management." Harvard Business Review: 91-102. Harrington, S. E. and G. R. Niehaus (1999). Risk Management and Insurance. Boston, McGraw-Hill. Lam, J. (2003). Enterprise risk management : from incentives to controls. Hoboken, N.J., Wiley. Mari, Dominique Drouet and Samuel Kotz (2001). Correlation and Dependence, Imperial College Press MacMinn, R. D. (2005). The Fisher Model and Financial Markets. Singapore, World Scientific Publishing McNeil, Alexander J., Rudiger Frey and Paul Embrechts (2005). Quantitative Risk Management. Princeton University Press Moeller, Robert R. (2007). COSO Enterprise Risk Management. Wiley Nelsen, R. B. (1999). An Introduction to Copulas. New York, Springer. Newhouse, J. P. (2002). Pricing the Priceless: A Health Care Conundrum. Cambridge, MIT Press. Stiglitz, J. E. (2002). Globalization and Its Discontents. New York, W. W. Norton. Stulz, R. M. (1996). "Rethinking Risk Management." Journal of Applied Corporate Finance 9(3): 8-24. The J.P. Morgan/Arthur Andersen Guide to Corporate Risk Management, Risk Publications, 1997 Tufano, P. (1996). "Who Manages Risk? An Empirical Examination of Risk Management Practices in the Gold Mining Industry." Journal of Finance 51(4): 1097-1137. |
|
|
Assessment Assessment will be by one 2,000-word literature review (50%), and one group project (50%). The literature review of an approved topic is due no later than November 19th; submission should be electronic. The group project is due on the day it is presented in class, i.e., either November 28th or December 5th. Presentation schedules will be announced before the Fall break. The literature review must demonstrate a thorough knowledge of the relevant literature as well as an understanding of the theoretical issues and practical application of risk management to the topic. All sources used in writing the review must be properly cited in the standard Harvard or Chicago style.
|
|
Course Outline
The course schedule is tentatively as follows:
|
Meeting |
Time |
Location |
Topic |
|
22 August |
6:00-8:50 |
COB 22E |
Introduction Course and student introductions Introduction to RefWorks and database searches
|
| 29 August |
6:00-8:50 |
COB 22E |
Risk MacMinn, R. D. (1999) Risk and Choice, Keynote speech to The International Risk Management and Insurance Conference, Taipei Lecture On the Roots of Risk Management Enterprise Risk Management (ERM) Ai, Jing and Patrick Brockett (2006). Enterprise Risk Management, University of Texas, Austin, Texas Lam, J. (2003). Enterprise risk management : from incentives to controls. Hoboken, N.J., Wiley
|
|
|
|
|
|
|
12 September |
|
|
Tutorials on Mathematica Mathematica assignment
|
|
|
|
|
|
| 19 September | 6:00-8:50 | COB 22E |
Expected Utility: Doherty, chapter 2 Friedman, Milton, and Leonard J. Savage, (August 1948) "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, 56(4): 279-304. MacMinn, Richard, (1995). "Lecture Notes on the Expected Utility Theorem." University of Texas Pratt, J. W. (1964). "Risk Aversion in the Small and in the Large." Econometrica 32: 122-36. Lecture On Pratt Rothschild, M. and J. E. Stiglitz (1970). "Increasing Risk: I. A Definition." Journal of Economic Theory 2: 225-43. Lecture On Rothschild and Stiglitz
Yaari, M. E. (1987). "The
Dual Theory of Choice Under Risk." Econometrica 55(1):
95-115 |
| 26 September |
6:00-8:50 |
COB 22E |
Moral Hazard and Adverse Selection Banks, chapter 1 Doherty chapter 3 Shavell, S. (1979). "On Moral Hazard and Insurance." Quarterly Journal of Economics 93(4): 541-562. Rothschild, M. and J. E. Stiglitz (1976). "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information." Quarterly Journal of Economics 90: 629-50 Lecture On Rothschild and Stiglitz
|
| 3 October |
6:00-8:50 |
COB 22E |
Portfolio Theory, Capital Market Theory and Risk Management Doherty chapters 4, 5, 6 Tobin, J. (1958). "Liquidity Preference as Behavior Toward Risk." Review of Economic Studies 25(2): 65-86. Lecture On Tobin Samuelson, P. A. (1967). "General Proof That Diversification Pays." Journal of Financial and Quantitative Analysis 2(1): 1-13. MacMinn, R. D. (1984). "A General Diversification Theorem: A Note." Journal of Finance 39(2): 541-50. Financial markets and risk allocations Diamond, P. (1967). "The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty." American Economic Review 57: 759-73 Lecture On the Fisher Model MacMinn, chapters 1, 2, 3, 4 MacMinn, Richard, The Risk-Shifting Problem and Convertible Bonds, Advances in Quantitative Analysis of Finance and Accounting, 1993
|
| 10, 17 October |
6:00-8:50 |
COB 22E |
Hedging Doherty chapter 8 Froot, K. A., D. S. Scharfstein, et al. (1994). "A Framework for Risk Management." Harvard Business Review: 91-102. Froot, K. A., D. S. Scharfstein, et al. (1993). "Risk Management: Coordinating Investment and Financing Problems." Journal of Finance 48: 1629-58. Lecture on Hedging
|
| 24 October |
6:00-8:50 |
COB 22E |
Stock Options
and Compensation MacMinn, chapter 4
Cummins, J. D. and N. A. Doherty (2006).
The Economics of Insurance
Intermediaries. Journal of Risk and Insurance 73: 359-396. |
|
31 October 7 November |
6:00-8:50 |
COB 22E |
Risk Management Banks, chapters 1, 2 and 3 Doherty, chapters 1, 7 and 8 Risk Management claims Stulz, R. M. (1996). "Rethinking Risk Management." Journal of Applied Corporate Finance 9(3): 8-24. Smith, C. W. and R. M. Stulz (1985). "The Determinants of Firms' Hedging Policies." Journal of Financial and Quantitative Analysis 20(4): 391-405. Tufano, P. (1996). "Who Manages Risk? An Empirical Examination of Risk Management Practices in the Gold Mining Industry." Journal of Finance 51(4): 1097-1137. Darlington, Angela, Simon Grout, John Whitworth, How safe is safe enough? An introduction to risk management, Presentation to the Staple Inn Actuarial Society, 12 June 2001 Lecture on Corporate risk management
|
|
14 November |
6:00-8:50 |
COB 22E |
Derivatives The J. P. Morgan/Arthur Andersen Guide to Corporate Risk Management, Risk Publications, 1997 Lecture on Derivatives and Corporate Risk Management Brennan, M. J. (1995). "Corporate Finance over the Past 25 Years." Financial Management 24(2): 9-22. Rothschild, M. and J. E. Stiglitz (1970). "Increasing Risk: I. A Definition." Journal of Economic Theory 2: 225-43.
|
|
|
|
|
|
|
21 November |
|
|
Thanksgiving Week |
|
28 November |
6:00-8:50 |
COB 22E |
Alternative Risk Transfer and Finance (ART) Banks, chapter 3, 7-9 Laster, David S., Mayank Raturi, “Capital Market Innovation in the Insurance Industry,” Sigma No. 3/2001 Laster, David S., “Insurance Linked Securities,” Swiss Re New Markets 1999 Helfenstein, R., "Securitization - New Opportunities for insurers and investors," Sigma No. 7/2006
|
|
|
|
|
|
|
5 December |
6:00-8:50 |
COB 22E |
Enterprise Risk Management (ERM) Course evaluation Ai, Jing and Patrick Brockett (2006). Enterprise Risk Management, University of Texas, Austin, Texas Lam, J. (2003). Enterprise risk management : from incentives to controls. Hoboken, N.J., Wiley
|
 |
Modification Date:
Tuesday, 30 August 2011 14:36 -0700 Comments to: Richard MacMinn |