Dr Yves Nosbusch

This course is available on the MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Financial Mathematics, MSc in Management and Regulation of Risk, MSc in Risk and Finance, MSc in Statistics (Financial Statistics) and MSc in Statistics (Financial Statistics) (Research). This course is not available as an outside option.

The course assumes a basic knowledge of finance theory, statistics and mathematics (calculus, linear algebra).

This course aims to provide an overview of the main theoretical concepts underlying the analysis of financial risk and to show how these concepts can be implemented in practice in a variety of contexts. This course shares some topics with FM442 Quantitative Methods in Finance and Risk Analysis. The course will include a selection of:

1. Conceptual foundations: diversification, hedging and their limits 
2. Fixed income securities
3. Options and dynamic replication
4. Value at Risk
5. Endogenous risk
6. Ideas from Behavioural Finance
7. Credit risk (ratings based models, structural models, reduced form models)
8. Credit derivatives

20 hours of lectures and 8 hours of classes in the MT. 2 hours of classes in the LT.

Students will be expected to produce 8 problem sets in the MT.

Course readings will vary from year to year depending upon the topics covered. Useful references are M Crouhy, D Galai and R Mark, Risk Management, McGraw-Hill, 2001; P Jorion, Value at Risk, McGraw-Hill, 2007; J Hull, Risk Management and Financial Institutions, Prentice-Hall, 2015; J Hull, Options, Futures and Other Derivatives, Prentice-Hall, 2014 and D Duffie and K Singleton, Credit Risk, Princeton University Press, 2003.

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