Azerbaijan University
School of Business
Fi 4400 Financial Risk Management
Spring, 2012
NOTE: It is your responsibility to read, understand and abide by all of the course information
and policies listed below. This course syllabus provides a general plan for the course; deviations
may be necessary.
Instructor:
Orkhan Ismayilov
E-mail: orxan.027@gmail.com, orkhan_ismayilov@cbar.az
Cell Phone: (055) 3700027
Class Hour: see the course schedule
Office hour: by appointment
1. Course Description
This course provides a clear and concise overview of specific ratios
that are used to measure financial performance. Performance areas
covered include liquidity, asset management, profitability, leverage,
market value ratios, and comparative analysis. The objective of the
course is to provide the user with ratios that can be useful in
measuring and monitoring financial performance in conjunction
with a set of financial statements.
In addition, course will focus on bank loan capital; however, other
sources of capital will also be discussed, especially with regards to
determining a firm’s appropriate financial structure
2. Prerequisites
You will need the knowledge of elementary calculus and statistics.
3. Office Hours
I do not have a specific office hour, but I can make an appointment
or I can answer any questions after the lectures or just send me an
email. I also encourage you to share with me any comments you
might have on the course.
4. Policies on Class Attendance and Class Discipline
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Please arrive on time to the class
Turn-off or switch to silence regime cell phones or any other
electronic devices (except calculators)
Students must ask the teacher the questions that worries them, not
the students during the lectures
Students are expected to attend all lectures and do all take-home
assignments and case study.
If the student misses any lecture, she/he is still responsible for
catching up on the material covered in the absence of that student
before coming to the next lecture. Therefore, it is responsibility of the
student to arrange with student colleagues to obtain notes if he or
she misses a class or classes.
Each student is expected to attend ALL scheduled class meetings for
the entire duration of the class meeting. An attendance sign-up
sheet will be circulated each class period. It is your responsibility to
sign the attendance sheet. If you do not sign the list, you will be
considered absent. Students arriving late may be permitted to sign
the sheet only at the discretion of the instructor.
Attendance will be graded to ensure the discipline in the class.
5. Academic Honesty
Plagiarism in any form is not acceptable. While discussion with
classmates regarding assignments and lecture topics is encouraged,
all work submitted must be your own. Any student found copying
during exams or quizzes, signing someone else's name to the
attendance list, using stored formulas in programmable calculators,
using non-authorized formula sheets or other notes during exams
will get a failing grade for that exam.
6. Grading
The course requirements are the Final exam, Mid-Term Exam and
five graded Take-home assignments. Weights on the various
components of the final grade are as follows
Final Exam
40%
Mid-Term Exam
20%
Group research presentation
20%
Attendance and Participation
20%
All course grades, once assigned, are final and cannot be changed
except in the rare event of a mathematical miscalculation by the
instructor. Attendance and participation during the discussions are
highly encouraged. Do not miss mid-term and final. Requests for
make-ups may be granted only under exceptional cases.
7. Final grades will base on this scoring:
Scores
A+ = 97 – 100
AKTS scores
A
= 93 – 96
A- =
90 – 92
B+
=
87 – 89
B
= 83 – 86
B-
= 80 – 82
C+
= 77 – 79
C
=
C-
= 70 – 72
D+
= 67 – 69
D
= 63 – 66
D-
= 60 – 62
F
= 0 – 59
73 – 76
A = 90 – 100
B = 80 – 89
C = 70 – 79
D = 60 - 69
E = 50 – 59
Fx = 40 – 49
F = 0 – 39
8. Exams
There will be a final exam. This exam will be closed-book.
Calculators are permitted, except those with word-processing
capabilities. The final exam is cumulative and will be given on the
day listed in the course outline. You must attend the final exam on
the scheduled date.
9. Group research presentation
Additionally, you will write a group research paper. This paper will
be written by multiple students with each part reviewed and
edited prior to submission by everyone in the group. Specific
instructions and information about the paper will be posted on
WebCT and discussed in depth during the second week of class.
10. Course Materials
 Required Text
Financial Reporting and Analysis, CFA Institute 2009, 2008, 2007
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Recommended Text
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Financial and Managerial Accounting, Williams, Haka, Bettner 14th
edition (2008) McGraw-Hill
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Lecture Slides and Handouts
These resources are the main part of your study package. You can
get lecture slides and handouts from the course webpage. You are
responsible from the topics covered in the lectures.
Week 1 – Lecture 1-2
Review of Financial Markets
 Financial Markets
 Different tradable financial products
 Financial Agents
Week 2 – Lecture 3-4
Risk Management in Banking sector
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Week 3 – Lecture 5-6
Fundamentals of Probability
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Week 4 – Lecture 7-8
Risk factors existing in banking operations
Introduction to Credit, Liquidity and Operational risk
Characterizing random variables
Multivariate distribution functions
Functions of Random variables
Probability distributions
Fundamentals of Statistics
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Parameter estimation
Regression analysis
Quiz 1
Week 5-6 – Lecture 9- Risk Management
12
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Week 7 – Lecture 13-14
Absolute and relative risk
Evaluation of the risk measurement process
Portfolio construction
Asset pricing theories
Arbitrage pricing theory
Risk of a portfolio
Different statistical and risk management exercises
Week 8 – Lecture 15-16
Mid-term exam
Week 9-10 – Lecture Bond Fundamentals
17-20
Discounting, present and future value
 Linear transformation of random variables and their
application to bond pricing theory
 Price-yield relationship from risk measurement tools for
these relationship
 Bond price derivatives
 Duration and convexity
Week 11-12 – Lecture Valuation and risk models
21-24
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Risk management tools
VaR models
Stress-testing
Week 13 – Lecture 25- Managing linear risk
26
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Week 14 – Lecture 27-
Unitary Hedging
Optimal hedging
Application of optimal hedging
Review for Final Exam
28
Week 15 – Lecture 2930
Final Exam