Dr Domingos Romualdo

This course is compulsory on the BSc in Finance. This course is not available as an outside option nor to General Course students.

Students must have completed Principles of Finance (FM213), Mathematical Methods (MA100) and Elementary Statistical Theory (ST102).

This course is intended for third-year undergraduates and builds upon FM212/FM213 Principles of Finance. The main topics covered are financial risk analysis and financial risk. The course provides students with a thorough understanding of market risk from both a practical and technical point of view. A representative list of topics covered includes:

• empirical properties of market prices (fat tails, volatility clusters) and forecasting of conditional volatility
• concepts of financial risk (volatility, Value-at-Risk
• univariate and multivariate volatility models (ARCH, GARCH)
• implementation and evaluation of risk forecasts
• endogenous risk

Students apply the models to real financial data using Matlab, a programming environment widely used in industry and academia. No prior knowledge of programming is assumed: students will learn-by-doing in class. Students will at times use data and software for classwork assignments.

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

Students will be expected to produce written work for classes and to make positive contributions to class discussion

J Danielsson, Financial Risk Forecasting: The Theory and Practice of Forecasting Market Risk will be the required textbook for the course.  Additional readings may be assigned as needed.

Coursework (100%) in the MT.