Minor financial risk management
By Wouter Smidt
The minor financial risk management focuses on risks. However, it focusses on risks that are very different than the risks we usually consider with econometrics. This minor is not based on the quantitative parts of risks, but more on the theory and how it is applied in the financial world.
The first two courses with which the minor starts are risk management in banking and risk management for financial institutions.
Risk management in banking is taught by two different teachers, and they focus on different subjects. The first part of the course will mostly be about the risks of banks, and how they have to take care of this. It involves a lot of knowledge about the financial statements of banks, and you will spend time going through a lot of annual reports of different banks as a project. The second project of this course are simply some exercises.
Risk management in financial institutions is taught by two teachers, who focus on different topics. The first part of the course focuses mostly on insurance companies. You will learn about the different risks an insurance company has, and how they can take care of these risks using the Solvency 2 framework. As a project, you will work out the solvency 2 framework yourself. The second part of the course focuses mostly on the assumptions of economic theory, and why often these assumptions are absurd and that they are even dangerous. For example, one of the assumptions was that no crisis could be possible, and then people were surprised a crisis did emerge. The project for this part of the course was to do a premortem analysis, which means you do an analysis where you assume all the worse things will happen. This way, you will have the worst-case scenario worked out and you can think about how you can prevent this.
In the second period, this minor consists of the courses: new developments in risk management and behavioural finance in real estate.
The course new developments in risk management will every week present a new development in the financial work and discuss some of the risks which are involved with this. You can think about climate change and cryptocurrencies, but also compliance and the resolution of companies. As projects, you will first present a new development that might influence risks for financial institutions. As a second project you will make an analysis about how much a company should invest in cryptocurrency and how much it should invest in traditional investment opportunities.
The course behavioural finance in real estate focuses mostly on human biases in finance. It challenges the traditional economic theory which states people are rational and maximize their gains and will present different biases where it can be observed that these statements do not always hold. As a project, you need to present the setup of a research you want to conduct on behavioural finance in financial institutions.
For the last course of this project, you will have your own research about one of the topics you previously had in this minor. You should mostly consider doing this minor if you are really interested in learning the theory about the risks of different financial institutions. Most of the exams in this course will be multiple choice exams with forty questions, and only five of these questions will involve any calculations. Hence, it is much more about the theory of risks than actually calculating the risks.