Dr Christoph Czichowsky and Dr Pavel Gapeev

This course is available on the MSc in Applicable Mathematics, MSc in Financial Mathematics, MSc in Quantitative Methods for Risk Management, MSc in Statistics (Financial Statistics), MSc in Statistics (Financial Statistics) (LSE and Fudan) and MSc in Statistics (Financial Statistics) (Research). This course is available with permission as an outside option to students on other programmes where regulations permit.

Pre-requisite:  Students must have completed Stochastic Processes (ST409).

This course studies various issues arising in the context of investment risk specification as well as with the mathematical theory of so-called alternative markets, such as commodity and energy markets. In particular, the course considers the structural credit risk models and the quantification of risk by means of copulas and risk measures. Also, the course expands on the modeling of alternative markets and addresses the problem of valuation of investments in real assets.

This course is delivered through a combination of classes and lectures totalling a minimum of 30 hours across Lent Term. This year, some or all of this teaching will be delivered through a combination of virtual classes and lectures delivered as online videos.

Two sets of written homework will be marked with feedback provided.

F.Benth, J.Benth, S.Koekebakker, Stochastic Modelling of Energy and Related Markets, World Scientific 2008.

H.Föllmer and A.Schied, Stochastic Finance, 3rd edition, De Gruyter, 2011.

A.McNeil, R.Frey and P.Embrechts, Quantitative Risk Management, Princeton University Press, 2005.

A.K.Dixit and R.S.Pindyck, Investment under Uncertainty, Princeton University Press, 1994.

Exam (100%, duration: 2 hours) in the summer exam period.