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Department of Finance, Insurance, and Real Estate

Section 1: Tuesday and Thursday, 11 a.m. – 12:15 p.m., Foster 203
Section 2: Tuesday and Thursday, 2 – 3:15 p.m., Foster 314
Fall 2019
Instructor: Dr. James R. Garven
The Frank S. Groner Memorial Chair of Finance
Professor of Finance and Insurance
Home page:
Course website:

Office Hours: 3:30-4:30 TR
Office: Foster 320.39
Phone: (254) 307-1317

1. Texts and Materials

2. Prerequisites

The only course prerequisite for Finance 4335 is Finance 3310. However, since Finance 4335 is rather quantitative in nature, you should also be “up to speed” in mathematics and statistics. The mathematics and statistics topics used in Finance 4335 are listed in the blog posting entitled “Calculus and Probability & Statistics recommendations“, where links to Khan Academy tutorials for each of these topics are provided. Section 1 of Professor Martin Osborne’s math tutorial is also a highly recommended resource for topics in mathematics applicable to Finance 4335.

3. Course Description

This course offers an integrated approach to risk management by combining concepts, tools, and techniques from finance and related disciplines such as economics and the decision sciences. It focuses attention on the identification, evaluation, pricing, and management of risk from corporate and personal perspectives. Topics covered include how to characterize and measure risk attitudes, compare and price risk, evaluate the effects that risk has on incentives, welfare, corporate value, etc.

4. Learning Objectives

After completing this course, students should understand:

    • The various measures of risk;
    • How to calculate risk measures for individual risk exposures and portfolios of risk exposures;
    • The steps of the risk management process; i.e.,
      • Identify risks;
      • Measure risks;
      • Evaluate different methods for managing risk; and
      • Implement an appropriate risk management strategy.
    • Methods which individuals and businesses can use to allocate and manage risk;
    • Factors which limit the extent to which risk can be diversified or traded from one counterparty to another;
    • Various types of insurance and derivative contracts and their use in risk management;
    • Basic financial valuation models and how risk is incorporated into these models; and
    • How risk management can be used to enhance corporate value as well as personal and social welfare.

5. Grade Determination

The final course numeric grade is based upon the following equation:

Final Course Numeric Grade = .10(Attendance and Participation) + .10(Quizzes) + .20(Problem Sets) + Max{.20(Midterm Exam 1) + .20(Midterm Exam 2) + .20(Final Exam), .20(Midterm Exam 1) + .40(Final Exam), .20(Midterm Exam 2) + .40(Final Exam)}

Since the final exam is comprehensive, this grading scheme allows students to redeem themselves on the final should they perform poorly on either of the midterms.

There will be two midterm exams given in class. The date for the first midterm exam is October 1 (in class), and the date for the second midterm exam is November 5 (also in the class). The dates for the two midterm exams are subject to change at the discretion of the instructor. However, the final exam is scheduled according to the official university schedule.

Final Course Letter Grade. The final course letter grade will be based upon the following schedule of final course numeric grades:

A 93-100% C 73-77%
A- 90-93% C- 70-73%
B+ 87-90% D+ 67-70%
B 83-87% D 63-67%
B- 80-83% D- 60-63%
C+ 77-80% F <60%

Since the final exam is comprehensive, this grading scheme allows students to redeem themselves on the final should they perform poorly on either of the midterms.

6. Office and Contact Information

My office is located in Foster 320.39 and my telephone number is (254) 307-1317. I can also be reached by email at the address and by text at 254-307-1317.

7. Attendance and Participation

This course will be conducted on an informal seminar basis. Students are expected to attend class regularly and punctually, as well as participate meaningfully. Furthermore, I abide by the Hankamer School of Business Attendance Policy, which calls for assigning a grade of “F” to any student who fails to attend at least 75 percent of all class sessions. It is the student’s responsibility to ensure that he or she is in compliance with this policy.

8. Other Course Policies

8. 1. Grade Appeals

Graded assignments and exams will be returned to students one week after the assignment deadline or the date of the exam. If you feel that a graded assignment or exam has not been fairly evaluated, then you may submit an appeal for the assignment or exam to be regraded. In order to be considered, your appeal must be submitted no later than two weeks after the date of the exam or due date for the assignment. Any appeals submitted beyond this deadline will not be considered.

If you decide to submit an appeal, email it to with the following subject header: “Grade Appeal for Finance 4335”. Include a clearly scanned or photographed copy of the question(s) that is (are) to be regraded, a copy of your answer(s), and an explanation as to why you think the question(s) merit(s) re-grading. I will then take it upon myself to regrade the question(s). Keep in mind that re-grading implies three possible outcomes: a higher grade, the same grade, or a lower grade.

The appeal procedure described above constitutes the “Conference with Faculty Member” requirement set forth in Baylor’s Academic Appeals Policy and Procedure document.

8. 2. Electronics Policies

The following electronics policies will be strictly enforced:

  • Neither laptops nor tablets may be used in class without the express permission of the instructor;
  • No audio or visual recording of lectures without the express permission of the instructor; and
  • No cell phone use during class, which includes texting, talking, photography, and videography.

8. 3. Late Work

Assigned problem sets are due at the beginning of class. If you expect to absent on a day when a problem set is due, it must be turned in at or before this time; otherwise, you will not receive any credit for the problem set. Furthermore, if you miss class on a day when a required reading is assigned, there will be no make-ups for the quiz that you miss (note: these rules do not apply in cases involving medical or family emergencies).

9. Course Blog

A course blog has been established for Finance 4335. This provides a convenient and timely means for distributing important announcements outside of class. The address for the course blog is, and it is linked from the “Course Blog” button on the home page of the course website.

I recommend that you regularly follow the course blog via any of the following methods:

10. Course Schedule

This course provides students with a “primer” on basic economic, statistical and financial principles, and applies these principles to the study of risk management decision-making by individuals and firms. The textbook material is supplemented throughout the course by various outside readings, all of which are available from the readings section of the course website. Although the course schedule is subject to change, the lecture notes page on the course website effectively serves as a course calendar, since it lists by date the sequencing of course material for the entire semester.

11. Academic Honesty and Integrity

Plagiarism or any form of cheating is not acceptable. Baylor’s honor code is an important resource for understanding various types of academic dishonesty, and I expect my students to be intimately familiar with it. The standards set forth in the honor code will be applied to all of your work in Finance 4335.

Cheating involves not only a breach of trust that disrupts the proper harmony of society and creation, but it is also an act of violence against one’s soul, corrupting judgment by sanctioning a distorted notion of success and honing destructive tools to pursue it.

12. Baylor University Title IX

Sexual and Gender-Based Harassment and Interpersonal Violence Policy:

Baylor University does not discriminate on the basis of sex or gender in any of its education or employment programs and activities, and it does not tolerate discrimination or harassment on the basis of sex or gender. If you or someone you know would like help related to an experience involving sexual or gender-based harassment, sexual assault, sexual exploitation, stalking, intimate partner violence, or retaliation for reporting one of these types of prohibited conduct, please contact the Title IX Office at (254)710-8454 or report online at

The Title IX office understands the sensitive nature of these situations and can provide information about available on- and off-campus resources, such as counseling and psychological services, medical treatment, academic support, university housing, and other forms of assistance that may be available. Staff members at the office can also explain your rights and procedural options if you contact the Title IX Office. You will not be required to share your experience. If you or someone you know feels unsafe or may be in imminent danger, please call the Baylor Police Department (254-710-2222) or Waco Police Department (9-1-1) immediately. For more information on the Title IX Office, the Sexual and Gender-Based Harassment and Interpersonal Violence policy, reporting, and resources available, please visit the website provided above.