COURSE INFORMATION Course Title: RISK MANAGEMENT AND INSURANCE

Code	Course Type	Regular Semester	Theory	Practice	Lab	Credits	ECTS
BAF 422	B	2	3	0	0	3	7.5

Academic staff member responsible for the design of the course syllabus (name, surname, academic title/scientific degree, email address and signature)	Dr. Fatbardha Morina fmorina@epoka.edu.al
Main Course Lecturer (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	Dr. Fatbardha Morina fmorina@epoka.edu.al , -
Second Course Lecturer(s) (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	M.Sc. Kriselda Sulçaj ksulcaj@epoka.edu.al
Language:	English
Compulsory/Elective:	Compulsory
Study program: (the study for which this course is offered)	Master of Science in Economics
Classroom and Meeting Time:
Teaching Assistant(s) and Office Hours:	NA
Code of Ethics:	Code of Ethics of EPOKA University Regulation of EPOKA University "On Student Discipline"
Attendance Requirement:	70%
Course Description:	Corporate finance and microeconomics are applied to matters of importance to commercial bankers. Among the subjects treated are bank asset portfolio construction, lending policies, liabilities management, bank capital structure, short run cash management, financial market rates and flows, and quantitative models for bank management. Commercial bank management is analyzed from an internal viewpoint in terms of what bank managers should look for in asset management and why; what market conditions they should be aware of; and what techniques they can use to meet changing economic and financial conditions.
Course Objectives:	The course is designed to provide the students with the structure of the risk management process, deeper knowledge of the financial risk management, analytical thinking and precise mathematical derivation, comprehensive core concepts of risk theory and risk management. The objective of this course is to provide students with a broad framework for evaluating all types of risk, along with conceptual tools for making risk management decisions rationally and consistently. It is intended for business students from all disciplines, including those who intend to take only one course in risk management and insurance. The course also serves as the introductory course for students wishing to pursue further studies in the field. The course focuses on the economics and science of risk and risk assessment and decision-making under uncertainty, and the methods for managing risk, including enterprise risk management (ERM). We analyze risk transfer markets in some detail, including issues of moral hazard, adverse selection, insurance pricing and the regulation of insurance markets. We will examine property and liability risks, morbidity/mortality/longevity risks common in life/health insurance markets as well as the increasing role capital markets in the transfer if risk. We also explore the rapidly changing landscape and the future of risk and risk management around the globe, from record natural disasters to cyber risks and drones to driverless vehicles, the “Sharing Economy” and the Internet of Things. The concept of systemic risk, its role in the global financial crisis and ensuing impact on financial market regulation will also be examined. In addition to learning about risk, students should find themselves challenged. The broader aim is to strengthen critical thinking ability, and grow problem solving and decision making skills.

BASIC CONCEPTS OF THE COURSE

1	Risk management process
2	Enterprise risk management
3	Insurance and reinsurance
4	Adverse selection
5	Moral hazard
6	Deductibles
7	Coinsurance
8	Market risk
9	Credit and liquidity risk
10	Operational risk

COURSE OUTLINE

Week	Topics
1	Syllabus Review, Course Programming Decision-Making: Risk Definitions, Risk Fallacies and risk Misperceptions, The Epistemological Status of Risk,Actions, Events, States of Nature, Actions Outcomes, What is risk?, The risk management process, Enterprise risk management, Objectives of risk management (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: Pages 21-65 )
2	Review of the Probability Theory: probability distribution, expected value, variance, standard deviation, skewness, percentile values, value at risk, correlation(Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: Pages 21-65 )
3	The Decision-Maker’s Risk Attitude: The Utility Theory and the Risk Attitude Toward the Risk, Other Theories Regarding the Individuals Risk Attitude. Integration of the Risk Attitude into the Decision Making Process The Risk Aversion and the Attached Probability to the Risky Event. The Risk Response to the Risk: Residual Risk vs. Inherent Risk, Risk Acceptation, Risk Mitigation, Risk Sharing (Hedging and Insurance) Risk Avoidance. The Risk Response of a Group of Decision Makers vs. Risk Response of a Decision Maker.
4	Enterprise-Wide Risk Management (ERM): The Five Stage Model of ERM (Objectives Setting, Identification, Assessment and Measurement, Risk Treatment, Risk Monitoring). Risk Appetite and Risk Tolerance, The Role of Systems and Risk Officers in Risk Management Process. (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: Pages 88-102)
5	Taxonomy of Risks for Individuals and Companies: Event-Driven Risk Classification, Diversified vs. Undiversified Risk, Financial vs. Business risk. Pooling Arrangements & Diversification of Risk. Impact of pooling on expected losses. Impact of pooling on variability of losses Correlation and pooling arrangements. (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: Pages 114-123)
6	Insurance Company Operations (Rating and Rate Making, Underwriting, Production, Claim Settlement, Reinsurance, Investment, Other Insurance Company Functions) Insurance Pricing (Determinants of fair premiums, risk clasifications, adverse selection, underwriting cycle, regulations, residual markets, metrics used to assess performance) (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: from chapter 5-8, Pages 133-162)
7	Fundamental legal principles (Indemnity, Insurable Interest, Subrogation) and Analysis of Insurance Contracts (definition of insured, endorsement and riders, deductibles, coinsurance) (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition: from chapter 9-10, Page 199-230)
8	Life Insurance (Types and purpose of life insurance, life insurance, disability and retirement products chapter 11, 12, 14). Property and Liability risks (personal property and liability risks, commercial property and liability risks, chapter 29, 26). (Principles of Risk Management and Insurance by G. Rejda, M. McNamara and W. Rabel, 14th edition, page 231-236, and page 437-505)
9	Measurement/Evaluation of Risk: Qualitative Assessment/Evaluation of Risk. Measurement of Risk Quantitative Methods used to Measure the Risk, Probabilistic Approaches vs. Non-Probabilistic Approaches.
10	Management of Market Risk
11	Credit and Liquidity Risk Management
12	Management of Interest Rate Risk
13	Foreign Currency Risk: Measurement and Management
14	Management of Operational Risk

Prerequisite(s):	- Calculus: Differentiation and Integration - Probability: Probability and Probability Distribution, Confidence Intervals and Hypothesis Testing - Statistics: Descriptive Statistics, Statistical measures, Correlation and Regression, Time series Analysis - Investing: Investing Risk And return, Fixed Income securities, Options and Other Derivatives, Currency and Commodity Markets Portfolio Theory - Corporate Finance: Investment Decisions and Strategies, Short and Long Term Financing, Capital Structure
Textbook(s):	Principles of Risk Management and Insurance by G. Rejda and M. McNamara, 14th Edition, Pearson Education Limited 2022 (ISBN- 13: 978-1-292-34974-9 and, eBook ISBN 13: 978-1-292-34976-3).
Additional Literature:	- Foundations of Risk Management & Insurance (Custom Text), McGraw-Hill. Available as e-text only (ISBN-13: 9781307111712 or ISBN-10: 1307111718). - Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk, Second Edition, Steven Allen, (ISBN: 9781118175453 and Online ISBN: 9781119203209)
Laboratory Work:	The computer works will be defined based on the class performance and will be scheduled accordingly informing the students 3-4 days before the class.
Computer Usage:	No
Others:	No

COURSE LEARNING OUTCOMES

1	Understand various interpretations of risk
2	Be able to calculate various measures of risk
3	Know the risk management process and the various methods that are used to manage risk
4	Be able to explain the meaning of an enterprise risk management approach and its advantages and disadvantages
5	Understand how risk can be diversified away and the factors that influence the extent to which risk can be diversified
6	Understand how moral hazard, adverse selection, correlated losses, and transaction costs impact the extent to which risk can be traded
7	Be able to explain and calculate “fair” insurance premiums
8	Understand how insurance markets are regulated and how that regulation is evolving
9	Understand the payoffs on different types of derivative contracts
10	Apply general concepts to specific types of risk, including longevity risk, natural catastrophe risks and emerging technology risks (e.g., cyber risks) 11. Perform a cost-benefit analysis of hypothetical risk mitigation expend

COURSE CONTRIBUTION TO... PROGRAM COMPETENCIES (Blank : no contribution, 1: least contribution ... 5: highest contribution)

No	Program Competencies	Cont.
Master of Science in Economics Program

COURSE EVALUATION METHOD

Method	Quantity	Percentage
Midterm Exam(s)	1	30
Project	1	30
Final Exam	1	30
Attendance		10
	Total Percent:	100%

ECTS (ALLOCATED BASED ON STUDENT WORKLOAD)

Activities	Quantity	Duration(Hours)	Total Workload(Hours)
Course Duration (Including the exam week: 16x Total course hours)	16	3	48
Hours for off-the-classroom study (Pre-study, practice)	14	4	56
Mid-terms	1	20.5	20.5
Assignments	1	26	26
Final examination	1	21	21
Other	1	16	16
Total Work Load:			187.5
Total Work Load/25(h):			7.5
ECTS Credit of the Course:			7.5

CONCLUDING REMARKS BY THE COURSE LECTURER

No