The course presents an advanced treatment of the theory of financial risk management and its application to infrastructure finance. The theory presented in the course covers the topics of economic and financial rate of return, measurement of risk exposure, cost of funds, capital structure, valuation methods, dynamic hedging using futures and swaps, and credit risk models and derivatives. Applications, discussed mostly in the form of infrastructure cases, will examine issues related to project finance, public-private partnerships, project appraisal, risk allocation, debt management, commodity, interest-rate and currency risk hedging, credit enhancement, regulation and privatization.
Prerequisite: Prior course in finance at the level of API-141 or equivalent.
Students should be familiar with the structure and pricing of forward contracts and options, as well as equity and bond pricing.