Economic and business students study financial markets in ChicagoJune 1, 2009
With the world’s financial systems reeling, students in Chris Conrad’s Financial Managment Seminar got an up-close view of how various institutions in Chicago are managing risk. During four days in Chicago, they visited the Chicago Board Options Exchange (CBOE), Chicago Mercantile Exchange (CME), Bank of America, and Advocate Health Care.
They also focused on a new tool for managing institutional risk known as Enterprise Risk Management (ERM). Traditionally, risk has been managed in separate categories: financial risk, operating risk, and credit risk. ERM considers all of the risks faced by a firm and integrates these into a single unified framework.
Thanks to support from the Berry Center, students paid just $75 each for the trip.
The Chicago Board Options Exchange was my favorite part of the trip. It was very interesting to see the options trading floor and talk with some of the traders. We learned a lot about financial services and derivatives in particular before the trip, but it is a whole different thing to actually go down to the floor and see how people do it. I did not really understand what risk management is before the class. However, I think I have a pretty solid idea of risk management after taking the course. Professor Conrad’s personal experience as an actuary was very helpful and interesting. Overall I think this class has been amazing and is one of my favorite ECB courses so far.
My favorite part of the Chicago trip was visiting with the risk manager for Bank of America. He explained how we got into the current crisis step-by-step and made it really easy to understand. I also enjoyed a lot of the questions we asked. Our class was curious to know why nobody waved the red flag or why people thought [the risks they were taking] were okay in the first place. A lot of people focus on economic models, and while most of the models are relatively accurate, they are in fact models and not the real world. To be an effective risk manager you need to be able to judge situations rationally and never forget that you are trying to protect assets from risk while taking a risk in return.
The best part about the Chicago trip was the visit to the Chicago Board of Options Exchange because it was a really interesting and educational experience. We learned a lot about the importance of financial risk management tools and how they can be improved to avoid crises such as this one.
My highlight would be seeing the multiple places use what we have learned in class in different ways. I thought that it was a really great opportunity to see a direct application of the topics we were learning about and discussing in class.
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