CEU Business School
BUSI 591F
Corporate Finance and Risk Management
(1.5 credits)
elective
AY 2014/15 Fall trimester
Instructor: Dr Peter Szilagyi (See last page for bio sketch)
Classroom: see Course schedule
Office: 412
Tel: 887 5092
E-mail: SzilagyiP@[Link]
Office hours: To be advised or by appointment.
Academic Program Coordinator: Melinda Nagy (nagyme@[Link])
Students Services Mgr.: Aniko Juhasz (juhasza@[Link])
1. PREREQUISITIES
Finance and statistics are required. You should also be familiar with the basic aspects
of derivative securities.
2. REQUIRED TEXT AND READINGS
The module will consist of a combination of lectures and case discussions.
Preparation sheets will be posted in advance for each session, outlining the required
readings and key learning points. The module webpage will include additional
materials such as lecture slides, spreadsheets and optional readings.
There is no required textbook for the course, but I highly recommend purchasing the
following books:
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Hillier, Grinblatt and Titman, Financial Markets and Corporate Strategy, 2nd ed.,
McGraw-Hill, 2011.
Hull, Options, Futures and Other Derivatives, 8th ed., Pearson Education, 2011.
Myint and Famery, The Handbook of Corporate Financial Risk Management, Risk
Books, 2012.
Stulz, Risk Management and Derivatives, South-Western, 2002.
3. COURSE DESCRIPTION AND OBJECTIVES
This module introduces you to financial risk management from the perspective of
non-financial corporations. Successful completion of the module should equip you
with the right tools and insights to manage risk in a corporate setting. You will learn
why firms should or should not manage risk, whether they do manage risk, and how to
measure and manage risk. To highlight the practical relevance of the module
materials, we will discuss a number of real-word case studies throughout the module.
Understanding the problems covered in the module will be helpful to all risk
management professionals and practitioners - treasurers, CFOs, CROs, CEOs, FDs,
traders; accountants, consultants; corporate bankers, coverage officers, corporate
financiers, private equity investors.
4. INTENDED LEARNING OUTCOMES
Core Learning Area Learning Outcome Methods used for
(or Educational Objective) assessing learning
Participate in class discussions and Participation in class
Interpersonal problem solving exercises. They will be discussions and case
Communication Skills able to present their arguments or problem solving will be
findings, persuade fellow students of the assessed and graded.
usefulness of their own conclusions and
objectively critique findings presented
by their fellow students.
Demonstrate an ability to use MS Excel Class problems and cases
tools in problem solving. will require the use of
Technology Skills Excel spreadsheets.
Work harmoniously with students of Utilize classroom diversity
Cultural Sensitivity and various nationalities. They will be for projects and discussion
Diversity capable of harnessing the diversity requiring teamwork.
advantage in viewing issues and
problems with a different, if not,
international, perspective.
Apply financial models and formulae to Class problems and cases
Quantitative Reasoning evaluate alternative investment and will require the use of
financing decisions. extensive quantitative
reasoning.
Exercise powers of inquiry, logical Lectures will highlight
Critical Thinking thinking, and critical analysis of many real world business
2
arguments and evidence. Interpret and issues and examples that
evaluate theoretical arguments and would demand analytical
empirical evidence. thinking and problem
solving skills.
Evaluate and discuss the challenges of Lectures will emphasize
Ethics and Social issues relating to social responsibility, the importance of ethics
Responsibility corporate governance and ethical and and social responsibility.
professional behavior arising from the
recent financial scandals.
Provide a comprehensive understanding Lectures will involve real
Management of the principles and techniques of world data and scenarios,
Knowledge and Skills financial decision making. Students are focusing on how financial
exposed to a number of economic and managers make investment
accounting concepts that practitioners in and financial decisions in a
the field use and apply. complex interplay of
business
5. ACADEMIC INTEGRITY
The Business School expects all students to adhere to the fundamental principles of
academic integrity in all behavior associated with their course work, as stated in the
CEU Honor Code (see Student Handbook). Cheating on the final exam or minute
papers will not be tolerated in this class, and will be punished to the maximum extent
permitted under CEU rules.
6. COURSE OUTLINE AND SESSION ASSIGNMENTS
Lecture 1: Introduction
• Why manage risk?
• How should firms organize risk management?
• Risk management and the firm’s stakeholders
Lecture 2: Interest rate and inflation risks
• How to develop an interest rate hedging policy
• The impact of interest rate policy on firm valuation
• Asset and liability management
Lecture 3: Foreign exchange risk
• How to develop a foreign exchange policy
• Transaction risk, translation risk and economic risk
• Managing risk from emerging market currencies
Lecture 4: Credit risk
• Counterparty risk methodology and protection
• Prehedging credit risk
• Integrated risk management
Lecture 5: M&A-related risks
• Risk management for M&As
• Hedging uncertain exposures
3
Lecture 6: Commodity risk
• Managing commodity-linked revenues and currency risk
• Managing commodity-linked costs and currency risk
Please note that the course outline is subject to changes either before or during class at
the discretion of the instructor.
7. GRADING AND ASSESSMENT
The assessment for the course comprises four components:
• Individual case write-up (20%)
• Class participation and problem solving (20%).
• Final exam (60%)
Grading will be based on the total score out of 100, in line with standard grading
patterns at CEU.
Individual case write-up
Each student is required to submit a report on one of the cases discussed in class. The
report should be (i) a four-page memorandum of analysis and recommendations
covering each case study question, and (ii) any accompanying exhibits (tables,
models, graphs) you wish to include as appendices. Please address the case study
questions in separate paragraphs. Please also make sure that you only include exhibits
that make a major contribution to the analysis and do not duplicate the discussion in
the report. The conclusions should be written as if you were making recommendations
to a major decision maker. Please indicate how you have arrived at your conclusions –
I care about the thinking process and logic rather than the correctness of the answer.
Class participation and problem solving
Class participation includes attendance, attitude, and volunteered and “cold call”
responses. You may be called on regarding discussion questions, readings, and cases.
Therefore, all reading assignments should be completed PRIOR to the class we cover
them. It is your responsibility to be active in class. Do not simply wait to be called on;
raise your hand or speak out.
The case method is often uncomfortable to students given the inherent uncertainty of
having to make choices with limited information at hand. Please note that there are
often no “right” answers: while I will provide some basic numbers and my analysis,
there may be many other valid ones.
Late arrivals, early departures, chatter, ringtones, internet surfing, eating or drinking
are disruptive to the quality of the learning environment in the classroom. Any such
behavior will be noted and count against your participation grade.
Final exam
4
There will be ONE closed-book final exam for this module. The test will be a two-
hour paper, including open-ended essay questions and /or numerical exercises. The
test questions will cover all parts of the syllabus.
8. BRIEF BIO OF THE INSTRUCTOR
Peter Szilagyi is a Visiting Professor of Finance at CEU Business School, and a
Lecturer (Assistant Professor) in Finance at Judge Business School, University of
Cambridge. Prior to joining CJBS in 2007, he obtained a PhD from Tilburg
University and held a research fellowship at Saïd Business School, University of
Oxford. He has been an external fixed-income consultant to the World Bank and the
Asian Development Bank, and before entering academia worked for the BBC World
Service.
Peter’s research interests include corporate finance, corporate governance,
international finance, and law and economics. He is the corporate finance subject
editor of the International Review of Financial Analysis, and holds one of the first
research grants awarded by the SWIFT Institute.
