Term:Spring

Course Code:sd00231230

Campus:Main Campus

Academic Organization:Economics

Prerequisites:Advanced Mathematics, Microeconomics

Credit:2（32 teaching hours）

Course Components:Lectures and Discussion Required

Course Note:Required for finance student

Course Description:

In late 2011 and early 2012, J.P. Morgan Chase trader Bruno Iksil (nicknamed the London Whale) built heavy short positions of Markit CDX North America Investment Grade Series 9 10-Year Index, CDX IG 9, betting credit improvement of U.S. corporations. The positions were so big that they swayed the market. In May 2012, European financial crisis deteriorated and JPMorgan suffered large losses. The London Whale not only incurred $6.2 billion in trading losses but allegedly also mismarked some of the losses to cover up their magnitude. His supervisor, Javier Martin-Artajo, was sued by the bank for assisting in the cover-up. JPMorgan Chase CEO Jamie Dimon said the strategy was “flawed, complex, poorly reviewed, poorly executed, and poorly monitored”.

Although under constant regulatory scrutiny and well-built risk management mechanism, scandals like this keep coming back once a while. How come so many smart people lose so much money? This course of financial risk management introduces students to the understanding and management of financial risk. We focus on financial institutions and study the tools that practitioners use to measure and control risks.

The lectures and readings are quite difficult, so do not get discouraged if you find them so. My hope is that the course will help in making this interesting topic accessible to you.