FM409E      Half Unit
Risk Management in Financial Markets

This information is for the 2018/19 session.

Teacher responsible

Dr Christian Julliard

Availability

This course is available on the MSc in Finance (part-time). This course is not available as an outside option.

Pre-requisites

Students must have completed Corporate Finance (FM422E) and Asset Markets (FM423E).

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 offer an introduction to the analysis and management of risk within financial markets. The course develops a conceptual framework for thinking about financial risk and shows how these concepts are implemented in practice in a variety of contexts. First, the course offers an overview of risk management in the context of portfolios of fixed income securities and derivatives. Next, we 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.

Teaching

30 hours of lectures in the LT.

This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.

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. 

Assessment

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

Key facts

Department: Finance

Total students 2017/18: 42

Average class size 2017/18: 39

Controlled access 2017/18: 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