Present
COLLEGE OF BUSINESS
Curriculum Committee
September 27, 2011
2:00 p.m.
2011-12 #3
E. Towell (chair), L. Matuszewski, J. Johnson, J. Burton, V. Krishnan, J. Marchewka, J.
Bruce, L. O’Connell, A. Buhrow, L. Marcellus, M. Salmon, P. Zerull
S. Marsh, D. Rau, B. Sharp, M. Simpson, L. Zhou Guests
Action on Minutes
BS Bus Admin
Finance Tool Kit
The minutes of the Second Meeting, dated September 13, 2011, were approved as presented.
It was announced the BS in Business Administration major will be housed in the
Department of Management beginning January 2012.
J. Johnson presented the Finance Tool Kit he created which will be accessible to all students and faculty. The study guide will refamiliarize students with financial statements, financial analysis, financing, and break-even analysis—topics which are presented initially in UBUS 310.
Two new graduate finance courses were approved with revisions: FINA 674 and FINA
688. (See pages 1-2 of 4)
Finance New Course
Proposals
MS in Financial Risk
Management
Adjournment
M. Simpson discussed a revised proposal for the new degree program MS in Financial
Risk Management which would include the two new finance courses as part of the degree requirements. After discussion, the committee approved the proposal as revised.
(See pages 2-4 of 4)
The meeting adjourned at 3:04 p.m.
Minutes approved: ______________________
_______________________________________
James Burton, Assistant Faculty Chair/Secretary
JB:cw
Copies to: Vice Provost; Committee on the Undergraduate Curriculum; Director of Admissions; Graduate Council
Curriculum Committee; University Publications; Career Services; Student Affairs; University Archives; College
Curriculum Committees; Student Association; Registration/Scheduling; College of Business Faculty

9/27/2011
NORTHERN ILLINOIS UNIVERSITY
Office of the Provost
REQUEST FOR APPROVAL OF A NEW DEGREE PROGRAM
†
1. Responsible department or administrative unit: The Department of Finance
2. Date of provost’s approval of degree request:
3. Level of degree program:
_____ Baccalaureate
___X_ Master’s
_____ Doctoral
_____ Ph.D.
_____ Ed.D.
4. Title of degree program: Masters of Science in Financial Risk Management (MS in FRM)
5. Rationale for program development:
Economy-wide Push for Enhanced Risk Management at the Firm Level
Over the last several years we have witnessed seismic shifts in the finance industry. Years of ever increasing asset prices and greater and greater risk-taking supported by the engineering of ever more complex financial derivatives have given way to plunging asset values and unprecedented timidity and trepidation. Thoughtful investors and decision makers have always been mindful of the need to assess and address the risks associated with their actions and positions, but in the aftermath of the (continuing?) financial crisis, business entities of all types are increasingly emphasizing and analyzing the financial risks to which they are exposed.
Pressures to enhance Risk Management at the firm level arise from multiple sources. Financial price volatility has increased over time, leading many to believe we have experienced a permanent upward shift in the risk associated with this volatility. At the same time, expectations of Boards of Directors have increased with respect to their risk management responsibilities.
Boards must understand firm risks, put risk management policies in place, assure that competent personnel are put in charge of effecting compliance with these risk management policies, and follow up and evaluate the risk management team’s performance. Executives and Boards are increasingly being considered culpable when there is a break down in risk management.
Governmental and industry regulators are increasingly emphasizing the need for risk management at the firm level in an effort to reduce system-wide catastrophes. Bond rating agencies are beginning to directly examine the firm’s risk management activities as part of the bond rating process. The current environment in which firms are exposed to numerous risks, and in which regulators and investors are increasingly interested in a firm’s risk management

policies, appears to be stabilizing as the “new normal,” leading to a concerted effort to find competent professionals trained in risk management.
NIU Department of Finance Board of Executive Advisors Identifies Shift towards Hiring graduates trained in Risk Management
Discussions with financial executives from banking, corporate treasury, and investments (many of whom serve on the NIU Department of Finance Board of Executive Advisors) have shown that while the level of hiring for entry level finance positions has been increasing in recent years, there has also been a shift in emphasis in terms of the types of positions firms are trying to fill, with many more firms specifically seeking candidates with training in financial risk management.
“Financial risk management is the process by which financial risks are identified, assessed, measured, and managed in order to create economic value,” (Jorion, 2011).
Growth in Risk Management Certification: increasing demand for focused professionals
The MS in FRM program would prepare students for careers in risk management by providing them an in-depth understanding of the latest risk management techniques and a grounding in the use of sophisticated hedging instruments and financial derivatives, including swaps, futures, and options. In addition, students who successfully complete the curriculum will be fully prepared to take and pass the exams leading to the professional certification known as the Financial Risk
Manager (or FRM).
The FRM designation is recognized, globally, as the premier certification for those in the
Financial Risk Management Profession. There are over 26,000 professionals who hold the FRM designation, many of whom work in the top banking and financial institutions in the United
States. The program for receiving the designation is considered rigorous and pass rates, over the last three years, for the two required exams range from only 39% to 53%.
We fully expect that a graduating MS FRM student would not only have the MS degree, but would also be well prepared to acquire the FRM designation.
Bureau of Labor Statistics Highlights Forecasts Growth in Demand for Risk Management
Positions that involve financial risk management, profiled in the Occupation Outlook Handbook,
2010-2011 edition (OOH), published by the Bureau of Labor Statistics (BLS), include financial managers and financial analysts. The complete OOH entries for Financial Analysts and
Financial Managers are attached to this request. The entries note the following in regard to risk management.
The OOH entry for Financial Analysts notes, “Risk analysts evaluate the risk of portfolio decisions, project potential losses, and determine how to limit potential losses and volatility using diversification, currency futures, derivatives, short selling, and other investment decisions.” It goes on to note, “Many positions require master’s degrees in finance… Positions

may also require professional licenses and certifications.” Further, “…a master’s degree in finance is often required. Advanced courses or knowledge of option pricing, bond valuation, and risk management are important.” The OOH further notes that for financial analysts,
“certifications enhance professional standing and are recommended by employers. Certifications are becoming increasingly common.” And more specifically, “Additional certifications are helpful for financial analysts who specialize in specific areas, such as risk management.”
Finally, the OOH entry for financial analysts goes on to note, “overall employment of financial analysts is expected to increase by 20 percent during the 2008-2018 decade, which is much faster than the average for all occupations…Certifications and graduate degrees…significantly improve an applicant’s prospects.”
The OOH entry for Financial Managers echoes that for Financial Analysts, and notes the following, “Many [financial managers] have a master’s degree or professional certification…many employers now seek graduates with a master’s degree, preferably in business administration, finance, or economics. These academic programs develop analytical skills and teach financial analysis methods and technology… Financial managers may broaden their skills and exhibit their competency by attaining professional certifications… [financial mangers] must cope with the growing complexity of global trade, changes in Federal and state laws and regulations, and the proliferation of new and complex financial instruments.”
With regard to employment prospects, the OOH entry for financial managers notes the following,
“Employment growth for financial managers is expected to be as fast as the average for all occupations. However, applicants will likely face keen competition for jobs.
Those with a master’s degree and certification will have the best opportunities
(emphasis added).”
Furthermore,
“employment of risk managers, who assess risk for insurance and investment purposes, also will grow.”
And,
“candidates with expertise in accounting and finance— particularly those with a master’s degree and certification —should enjoy the best job prospects. An understanding of international finance, derivatives, and complex financial instruments is important (emphasis added).”
Thus, a master’s program focused on financial risk management that entails a deep grounding in the latest hedging techniques and an understanding of the increasingly complex financial instruments used in risk mitigation, which also prepares students for a professional certification as a Financial Risk Manager, would seem to best position our students for those jobs for which there is the greatest demand in the financial sector.

6. Evidence of student demand for the program (needs analysis):
In the Spring semester of 2011, a survey of 475 Finance Juniors, Seniors, and recent Alumni was conducted. 79 students/alumni or 16.63% responded. The survey measured interest in an MS in
FRM program. The results are summarized as follows:
Question 1: How likely is it that you will pursue a master's degree?
Response
# of respondents
Very Unlikely Unlikely Neutral
1 0 9
Likely Very Likely
33 35
Question 2: If you are thinking about pursing a master's degree, which of the following areas would you find attractive?
Response
# of respondents
MBA
55
MS FRM
65
MAS
20
MIS
6
Question 3: How interested would you be in an MS in Financial Risk Management offered by the
Finance Department at NIU if you could get the degree with just 30 credit hours in addition to your undergraduate degree (30 credit hours would be two regular semesters and one summer semester)?
Response Not Interested at All
1
Not Very
Interested
3
Indifferent
2
Somewhat
Interested
35
Very
Interested
38 # of respondents
Question 4: If you are interested in an MS in Financial Risk Management, please indicate your preferences for the location where the courses would be offered.
DeKalb Campus
Response
# of respondents
Completely
Unacceptable
Location
2
Less
Preferable
Location
10
Indifferent
13
Acceptable
Location
19
Extremely
Desirable
Location
34
Naperville Campus
Response
# of respondents
Completely
Unacceptable
Location
3
Less
Preferable
Location
11
Indifferent
9
Acceptable
Location
31
Extremely
Desirable
Location
24

Question 5: If an MS in Financial Risk Management were available at NIU, please indicate your level of interest given the possible prices for the program listed below.
$18,630
Response Not Interested at All
1
Not Very
Interested
5
Indifferent
8
Somewhat
Interested
32
Very
Interested
33 # of respondents
In summary, 55 to 65 respondents indicated that they would be somewhat interested or very interested in a one-year, MS in FRM program, on the Naperville Campus, costing $18,630 .
7. Proposed date of implementation: Fall 2013
8. Site(s) of program delivery:
_____ On campus
__X__ Off campus in Region(s): Naperville Campus
9. Description of proposed program:
The program will consist of 10, 3-credit hour, courses covering the following topics:
FINA 555: Analysis of Derivative Securities a) Mechanics of OTC and exchange markets b) Forwards, futures, swaps and options
Mechanics
Pricing and factors that affect it
Uses in hedging and hedging strategies
Delivery options c) Interest rates and measures of interest rate sensitivity d) Derivatives on fixed-income securities, interest rates, foreign exchange, and equities e) Commodity derivatives f) Foreign exchange risk g) Corporate bonds
FINA 560: Financial Markets and Investments a) Subprime mortgages and securitization b) Counterparty risk and OTC derivatives c) Credit risk concentration d) Credit derivatives
Types and uses
Mechanics and structure
Valuation e) Structured finance and securitization
The structuring and securitization process
Agency problems and moral hazard in the securitization process

Tranching, subordination, and support f) Default risk
Quantitative methodologies
Loss given default and recovery rates
Estimating defaults and recoveries from market prices and spreads
The use of historical default rates and credit risk migration g) Expected and unexpected losses
FINA 575: Financial Data Analysis a) Discrete and continuous probability distributions of adverse financial outcomes. b) Population and sample statistics c) Statistical inference and hypothesis testing of the financial hazards faced by firms and individuals d) Estimating the parameters of distributions the outcomes of financial events e) Graphical representations of statistical relationships among financial variables f) Linear regressions involving financial variables
FINA 603: Seminar in Financial Research a) The use of Monte Carlo methods for modeling financial events. b) Estimating correlation and volatility (GARCH and other techniques) c) Volatility term structures d) Quantifying volatility in VaR models
FINA 622: Security Analysis a) Portfolio construction b) Portfolio-based performance analysis c) Tests of the Capital Asset Pricing Model (CAPM) d) Portfolio and component VaR e) Risk budgeting f) Risk monitoring and performance measurement g) Hedge funds
Hedge fund strategies
Due diligence and fraud detection
Liquidity
Risk management of hedge funds h) Private equity
FINA 623: Investment Management a) Value-at-Risk (VaR)
Applied to stock, currencies, and commodities
Applied to linear and non-linear derivatives
Applied to fixed income securities with embedded options
Structured Monte Carlo, stress testing, and scenario analysis
Extending VaR to operational risk
Limitations as a risk measure
Coherent risk measures

b) Expected and unexpected losses c) Operational risk d) Stress testing and scenario analysis e) VaR and other risk measures
VaR mapping
Backtesting VaR
Expected shortfall (ES) and other coherent risk measures
Parametric and non-parametric methods of estimation
Modeling dependence: correlations and copulas
Extreme value theory (EVT)
FINA 630: Analysis of Fixed Income Securities a) Fixed income valuation
Discount factors, spot rates, forward rates, and yield to maturity
Arbitrage and the Law of One Price
One factor measures of price sensitivity b) Country and sovereign risk models and management
Fundamental analysis
Contingent claims approach c) External and internal credit ratings d) Fixed Income Securities
Duration, DV01, and convexity
Key rate exposures
Hedging and immunization
Risk neutral pricing
Mortgage-backed securities: structure and valuation
FINA 662: Financial Management Strategies a) Option valuation
Pricing options using binomial trees
The Black-Scholes-Merton Model
The “Greeks” b) Volatility: smiles and term structures c) Exotic options
FINA 674: Financial Risk Management I (to be created) a) The role of financial risk management b) Basic types of financial risk, measurement and management tools c) Creating value with financial risk management d) Modern portfolio theory e) CAPM - Standard and non-standard forms f) Singles and multi-index models and the Arbitrage Pricing Theory g) Risk-adjusted performance measurement h) Enterprise risk management i) Financial disasters and risk management failures j) Ethics in financial risk management

FINA 688: Financial Risk Management II (to be created) a) Calculating and applying risk-adjusted return on capital (RAROC) b) Estimating liquidity risk, sources of model risk c) Evaluating the performance of risk management systems d) Validating VaR models e) Enterprise risk management (ERM) f) Economic capital g) Operational loss data
Frequency and severity distributions
Modeling and fitting distributions
Data sufficiency
Extrapolating beyond the data h) Failure mechanics of dealer banks i) Regulation and the Basel Accords
Minimum capital requirements
Methods for calculating credit, market, and operational risk
Liquidity risk management
Modeling risk aggregation
Stress testing
Revisions to the Basel II Accord
The Basel III framework
10. Learning Outcomes:
Graduates will be able to calculate the value at risk (VaR) in various scenarios.
Graduates will compare derivative markets and the use and pricing of various derivatives.
Graduates will assess various risk mitigation techniques and be able to analyze situations and make recommendations regarding risk mitigation.
Graduates will estimate econometric models and make predictions based on those models.
Graduates will explain regulatory requirements for risk mitigation in various situations.
11: Expected methods for course delivery: Lecture and Seminar
12. Criteria for admission to the program:
In addition to the College of Business standards listed under “Graduate Study in Business,” an applicant is required to have a baccalaureate degree from an accredited institution with at least
15 semester hours in finance or department approval.
Phase One

See Phase One Requirements listed under “Graduate Study in Business.”
AND
The Phase One foundation courses will be included in a student’s program of study unless she or he has earned a C or better in corresponding undergraduate courses or a B or better in equivalent graduate courses elsewhere, or has passed the first and only attempt of the Phase One exemption examination.
In addition, those students who do not have 15 undergraduate semester hours in finance must complete FINA 607, FINA 620 and FINA 650 (or their equivalent) with a grade of B or better in each course.
13. Credit hour requirements to complete degree: 30 credit hours
14. Explain expected credit hours, enrollment, and degree completions within the first three years of implementation:
Student Enrollment Projections 1 st Year 2
Number of Program Majors (Fall headcount) 30 nd Year 3 rd Year
30 30
Annual Full-Time-Equivalent Majors
Annual Credit Hours in EXISTING Courses
Annual Credit Hours in NEW Courses
Annual Number of Degrees Awarded
30
720
180
30
30
720
180
30
30
720
180
30
15. Explain the adequacy of existing library and other resources to support program delivery:
Currently resources are adequate; however, should student fees be sufficient, it would be advantageous to enhance current resources with additional databases appropriate for research in the field of financial risk management.

16. Explain staffing needs (current and future) as well as funding and source of funds:
The courses will be staffed by current faculty, teaching on and off load, and new part-time instructors, with all stipends to be funded by the delivery fee.
Resources
Total Requirements
1 st Year 2 nd Year 3 rd
Amount in Dollars
136,000 136,000
Year
136,000
Federal Sources
Other Non-State Sources
Existing State Sources
Internal Reallocation
0,000
104,000
*
22,000
10,000
0,000
104,000
*
22,000
10,000
0,000
104,000
*
22,000
10,000
Expenditures
Faculty
Personal Services/Staff
Equipment and Instructional Needs
Amount in Dollars
88,000 88,000 88,000
22,000 22,000 22,000
10,000 10,000 10,000
Library
Other Support Services
1,000 1,000 1,000
15,000 15,000 15,000
Faculty
Staff
Student/GA
Personnel
2.67
0.50
0.00
FTE
2.67
0.50
0.00
2.67
0.50
0.00
* Funding from student delivery fee. Minimum number of students required to meet this funding requirement at current level of the fee is: 10.80 students.
†
Attach catalog copy including course descriptions
U\Planning\Forms\NewDegreeRequest
Revised September 2009

APPENDIX A : Ad Hoc Board of Executive Advisors for Risk Management
Name
Arpan Patel
Position
Risk Examiner
Organization
Federal Depository Insurance
Corporation (F.D.I.C.)
Credit Risk Associate CME Group Bryan McBlaine
Dan Onak
Daniel Carmody
James O’Brien
Risk Manager
Managing Partner
Harely-Davidson Financial
TreaSolutions, Inc.
Credit Risk Specialist Federal Reserve Bank of
Chicago
James Maitland Citigroup, Inc
Jeff Rodgers
Director of Operations
Risk Management
VP-Services
Operational Risk
Manager for the
Americas
Royal Bank of Scotland
Michael Campagna Treasury Risk Analyst
/ Asset-Liability
Management
Michael Syzmanski Principal Partner
The Northern Trust Company
Location
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
Chicago, IL
New York, NY
Chicago, IL
Chicago, IL
Chicago, IL
Timothy Levandoski VP-Derivatives
Market Business
Development
ValueKnowledge LLC
Eurex (Parent company of the
Swiss and German Stock
Exchanges, in addition to other financial exchanges)
Chicago, IL

APPENDIX B : Catalog Description of the Program
Master of Science in Financial Risk Management
Department of Finance
The MS FRM program provides advanced study in financial risk management to prepare students for careers in risk management in banks, investment firms, and in corporate treasury departments. The program is designed for fulltime students. The program focuses on the latest advances in hedging and risk mitigation techniques incorporating the use of complex financial instruments, including swaps, futures, forwards, and options.
Admission
In addition to the College of Business standards listed under “Graduate Study in Business,” an applicant is required to have a baccalaureate degree from an accredited institution with at least
15 semester hours in finance or department approval.
Phase One
See Phase One Requirements listed under “Graduate Study in Business.”
AND
The Phase One foundation courses will be included in a student’s program of study unless she or he has earned a C or better in corresponding undergraduate courses or a B or better in equivalent graduate courses elsewhere, or has passed the first and only attempt of the Phase One exemption examination.
In addition, those students who do not have 15 undergraduate semester hours in finance must complete FINA 607, FINA 620 and FINA 650 (or their equivalent) with a grade of B or better in each course.
Requirements
The following courses are required for the MS FRM Degree.
FINA 555: Analysis of Derivative Securities
FINA 560: Financial Markets and Investments
FINA 575: Financial Data Analysis
FINA 603: Seminar in Financial Research

FINA 622: Security Analysis
FINA 623: Investment Management
FINA 630: Analysis of Fixed Income Securities
FINA 662: Financial Management Strategies
FINA 674: Financial Risk Management I
FINA 688: Financial Risk Management II

APPENDIX C : Admission to Graduate Programs in Business
Admission to Graduate Programs in Business
Admission to the various graduate programs in business is competitive and limited to those candidates who can demonstrate high promise of success in a graduate business degree program.
In addition to compliance with the policies of the Graduate School, the College of Business considers several indicators of potential for success in graduate business studies including, but not limited to, the following.
 A minimum cumulative GPA of 2.75 (based on a 4.00 system) at the baccalaureate institution, or a minimum cumulative GPA of 2.75 in the last 60 hours of the baccalaureate program, or the completion of 15 or more semester hours of graduate work at an accredited institution with a minimum GPA of 3.20.
 The total score and verbal and quantitative percentiles, and where available the analytical writing assessment (AWA) score, on the GMAT standards set by the individual graduate programs in business.
 Work experience at the post-baccalaureate level, where applicable.
 Leadership and communication skills as documented in a goals statement and resume.
 A minimum of two letters of recommendation.
 Submission of results on the Test of English as a Foreign Language (TOEFL) for all applicants whose native language is not English.
At the discretion of the respective program directors, candidates may be required to come in for an interview or to submit additional materials deemed important in assessing potential for success in graduate business studies.