Dr Domingos Romualdo

This course is available on the IMEX Exchange, MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Finance and Economics, MSc in Finance and Economics (Research), MSc in Financial Mathematics, MSc in Risk and Finance and MSc in Risk and Stochastics. This course is not available as an outside option.

A background in statistics and mathematics is required. Prior programming experience is helpful but not required. Students without prior knowledge of MATLAB are encouraged to take FM457 (Computational Tools in Finance) concurrently.

This graduate-level course covers important quantitative and statistical tools in applied finance. It studies financial markets risk, with a particular focus on models for measuring, assessing and managing financial risk. Students will be introduced to the application of these tools and the key properties of financial data through a set of computer-based homework assignments and classes.

The following topics will be covered: review of statistics and introduction to time series econometrics; modelling of financial returns; volatility models (including GARCH-type models); the concept of implied volatility; risk measures and coherence; Value-at-Risk and Expected Shortfall; simulation-based methods, with applications to option pricing.

Implementing the models and tools in MATLAB is an essential part of the course. The homework assignments are designed to guide the students to all stages of the analytical process from locating, downloading and processing financial data to the implementation of the tools and interpretation of results. Students will have the opportunity to explore the databases available at the LSE and to become comfortable working with real data. Through the course, students will build their own toolbox of routines that can be used elsewhere.

20 hours of lectures and 10 hours of seminars in the MT.

Weekly homework assignments to be solved using MATLAB.

The core text for this course is:

Jon Danielsson, Financial Risk Forecasting, John Wiley & Sons, 2011.

Extra readings will be assigned for selected topics.

Exam (75%, duration: 1 hour and 30 minutes) in the main exam period.
Project (20%, 2000 words) and presentation (5%) in the MT.