Dr Christian Julliard

This course is available on the MSc in Finance (full-time), MSc in Finance (full-time) (Work Placement Pathway), MSc in Finance (part-time), MSc in Finance and Economics, MSc in Finance and Economics (Work Placement Pathway), MSc in Finance and Private Equity and MSc in Finance and Private Equity (Work Placement Pathway). This course is not available as an outside option.

This course does not permit auditing students.

Students must have completed either Asset Markets (FM423 or FM423E) and Corporate Finance (FM422 or FM422E) or Financial Economics (FM436)

• 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.

30 hours of lectures in the WT.

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.

Problem sets. In addition, students will have the opportunity to present the results of a case study to the class.

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.

Continuous assessment (100%) in the WT.