FM409      Half Unit
Risk Management in Financial Markets

This information is for the 2017/18 session.

Teacher responsible

Dr Paul Whelan


This course is available on the MSc in Finance (full-time), MSc in Finance and Economics and MSc in Finance and Private Equity. This course is not available as an outside option.


Students must have completed Asset Markets (FM423) and Corporate Finance (FM422).

Course content

  • Hedging in equity and fixed income markets
  • Market Risk, Value at Risk and Expected Shortfall
  • Endogenous Risk and Limits to Arbitrage
  • Credit risk and structured products

The aim of this course is to give an introduction to the analysis and management of risk within financial markets.The objective of the course is to develop a conceptual framework for thinking about financial risk and to show how these concepts are implemented in practice in a variety of contexts. First, the course gives an overview of risk management in the context of portfolios of fixed income securities and derivatives. Next, will discuss the implementation and the merits of Value at Risk measures. We will spend some time on endogenous risk and limits to arbitrage. In the context of credit risk we will cover ratings based and structural models, as well as credit risk on portfolios and credit derivatives. A final topic covers regulation and the recent credit crisis. Throughout, the course spends a significant amount of time on practical applications of the theories that are introduced. Some limitations of current approaches are also discussed.


30 hours of lectures in the LT.

Formative coursework

Problem sets. In addition, students will have the opportunity to present the results of a case study to the class.

Indicative reading

Course readings will vary from year to year depending upon the topics covered. The main reference is: John C. Hull, Risk Management and Financial Institutions, Wiley, 2015, 4th edition.

Additional useful references are: Michel Crouhy, Dan Galai and Robert Mark, Risk Management, McGraw-Hill, 2001. Philippe Jorion, Value at Risk, McGraw-Hill, 2007, 3rd edition. Jon Danielsson, Financial Risk Forecasting, Wiley, 2011. John C. Hull, Options, Futures and Other Derivatives, Pearson, 2012, 8th edition. Darrell Duffie and Ken Singleton, Credit Risk, Princeton University Press, 2003.


Exam (90%, duration: 2 hours) in the main exam period.
Coursework (5%) and presentation (5%) in the LT.

Key facts

Department: Finance

Total students 2016/17: 97

Average class size 2016/17: 47

Controlled access 2016/17: Yes

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Team working
  • Problem solving
  • Communication
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills