Dr Y Nosbusch, OLD 4.25

Available only to students on the MSc Accounting and Finance, MSc Applicable Mathematics, MSc Econometrics and Mathematical Economics, MSc Economics, MSc Financial Mathematics, MSc Finance and Economics, MSc Finance and Economics (Research) and MSc Management and Regulation of Risk.

The course assumes a basic knowledge of finance theory, statistics and mathematics (calculus, linear algebra).

This course aims to provide an overview of the main theoretical concepts underlying the analysis of financial risk and to show how these concepts can be implemented in practice in a variety of contexts. This course shares some topics with FM442 Quantitative Methods in Finance and Risk Analysis.

The course will include a selection of:

1. Conceptual foundations: diversification, hedging and their limits

2. Value at Risk

3. Risk analysis of fixed income portfolios

4. Options and dynamic replication

5. Endogenous risk

6. Ideas from Behavioural Finance

7. Credit risk (ratings based models, structural models, reduced form models)

8. Credit derivatives

Lectures weekly in MT (20 hours). Classes (10 hours).

Course readings will vary from year to year depending upon the topics covered. Useful references are M Crouhy, D Galai and R Mark, Risk Management, McGraw-Hill, 2001; P Jorion, Value at Risk, McGraw-Hill, 2007; J Hull, Risk Management and Financial Institutions, Prentice-Hall, 2007; J Hull, Options, Futures and Other Derivatives, Prentice-Hall, 2008 and D Duffie and K Singleton, Credit Risk, Princeton University Press, 2003.

A two-hour written examination in the ST (100%).