MGT 710A: Risk Management

Instructor: Prof. Fotios C. Harmantzis
Firstname.Lastname at stevens dot edu
www.stevens.edu/perfectnet
www.stevens.edu/fina

Teaching Assistant: Praveen Tanguturi (vtangutu at stevens dot edu)

Course Description:

The course targets graduate and advanced undergraduate students across all Schools (Management, Engineering, Sciences), who are interested in enhancing their knowledge of the way risk can be measured, analyzed and managed. The major theme of the course is the Option Pricing Theory and models.  Options theory is becoming very popular in investment banking (portfolio theory, trading financial derivatives, M&A, equity valuation, etc.), consulting and investments.  Financial and non-financial (real) options will be discussed.  Theoretical and practical aspects will be covered, with applications to different industrial sectors (telecommunications, IT, pharmaceutical, etc.).

Learning Goals:

After taking this course students will be proficient in:

  1. Continuous and Discreet time modeling
  2. Financial options theory
  3. Real options theory
  4. Portfolio theory

Required Text:

Recommended Texts/Additional Readings:

Grading:

Homeworks (Total 4)
 15%
Midterm Exam
25%
Project
 20%
Final Exam
40%

Lectures:

  1. Introduction to Risk & Valuation
    • Introduction to Risk and Financial Derivatives
    • Risk and Return: CAPM Model, Modern Portfolio Theory
    • Traditional Valuation Approaches
  2. Financial Options
    • Binomial Trees
    • Continuous-Time Modeling
    • The Black-Scholes Model
    • Numerical Techniques
  3. Real Options
    • Real Options: The Option to Delay
    • Real Options: The Option to Expand
    • Real Options: The Option to Abandon
  4. Value at Risk
    • The "Greeks"
    • Value at Risk
    • Estimating Volatilities and Correlations

Recommended Readings:

  1. Alleman, James. 2002. A new view of Telecommunications Economics, Telecommunication Policy . 26, pp. 87-92.
  2. Alleman, James. 2003. How should telecom companies be valued? America 's Network. 107(15), pp. 34-40.
  3. Alleman, James., Rappoport, Paul. 2002. Modeling Regulatory Distortions with Real Options. The Engineering Economist . 47(4), pp. 390-417.
  4. Basili Marcello, Fontini Fulvio. 2003. The Option Value of the UK 3G Telecom licenses, Info: the journal of Policy, Regulation and Strategy for Telecommunications. 5(3), pp. 48-52.
  5. Benaroch, M. 2002. Managing Information Technology Investment Risk: A Real Options Perspective. Journal of Management Information Systems . 19(2), pp. 43-84.
  6. Benninga, S. and Tolkowsky, E.. 2002. Real options-an introduction and an application to R&D valuation. The Engineering Economist . 47(2), pp. 151-168.
  7. Bowman, E. H. and Moskowitz, G. T. 2000. Real Options Analysis and Strategic Decision Making. Organization Science. 12(6), pp. 772-777.
  8. Coopeland, T. E. and Keenan, P. T. 1998. Making real options real. Mckinsey Quarterly 3 , pp. 128-141.
  9. Copeland, T. & Howe, K. M. 2002. Real options and strategic decisions. Strategic Finance. 83(10), pp. 8-11.
  10. Copeland, T. E. & Keenan, P. T. 1998. How much is flexibility worth?. McKinsey Quarterly. 2, pp. 38-49.
  11. Dixit, A. K. & Pindyck, R. S. 1995. The options approach to capital investment. Harvard Business Review. 73(3), pp. 105-115.
  12. Edelmann, J., Kylaheiko, K., Laaksonen, P., & Sandstorm, J. 2002. Facing the Future: Competitive Situation in Telecommunications in Terms of Real Options. IAMOT2002 11 th International Conference of Management of Technology .
  13. Herath Hemantha S. B. and Park Chan S. 1999. Economic Analysis of R&D Projects: An options approach. The Engineering Economist. 44(1), pp. 1-35.
  14. Herath Hemantha S. B. and Park Chan S. 2002. Multi-stage capital investment opportunities as compound real options. The Engineering Economist. 47(1), pp. 1-27.
  15. Luehrman, T. A. 1998a. Investment Opportunities as Real Options: Getting Started on the Numbers. Harvard Business Review. 76(4), pp. 51-60.
  16. Luehrman, T. A. 1998b. Strategy as a Portfolio of Real Options. Harvard Business Review . 76(5), pp. 89-99.
  17. Trigeorgis L. 1993. Real Options and Interactions with Financial Flexibility. Financial Management. 22(3), pp. 202-224.
  18. Trigeorgis L. 2005. Making Use of Real Options Simple: An Overview and Applications in Flexible/Modular Decision Making . The Engineering Economist . 50(1) pp. 25-53.

Past Projects:

Recommended Sites: