3 (ECTS) - 24 Contact Hours
We start with the principles of Markowitz theory, i.e. discuss the benefits and limitations of financial risk diversification and prepare the ground for the Value-at-Risk concept which is introduced in the second part of the course.
Using the no arbitrage argument, the complexity of financial markets will be explained, followed by technical means to insure against a “bad” development of the currency exchange rate. The first part of the lecture closes with the theory of comparative cost advantages and some conclusions which can be derived for Latvia.
We continue to analyse the risk exposure in the Global and European financial markets, followed by the description of the complexity of risk management in the financial industry. We follow the historic development of the Basel-Regime. We drill down risk management techniques to the 4 sectors of the financial industry: banking, insurance, asset management and real estate