杏吧论坛

Dr Jon Danielsson and Dr Ansgar Walther

This course is compulsory on the MSc in Risk and Finance. This course is not available as an outside option.

This course is designed to expose students to the breadth of risk management thinking and approaches across different areas. The course is in two sections – Part 1 is taught by Dr Danielsson and Part 2 by Dr Walther. These sections run concurrently and cover the following topics:

Dr Danielsson’s part of the course covers important quantitative and statistical tools in applied finance. It studies financial market 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 course aims to introduce quantitative concepts and techniques in many areas of finance. Sample topics include risk measures (e.g., Value-at-Risk and Expected Shortfall, including implementation and backtesting), univariate and multivariate volatility models, Monte Carlo Simulations, and associated topics in Econometrics. This list is meant to be representative, but topics may be added or removed. Recent stress events, such as the global crisis in 2008, Covid-19 in 2020 and Russia’s invasion of Ukraine are used to illustrate the various methodologies presented in the course.

Implementing the models and tools in R is an essential part of the course. The weekly 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 杏吧论坛 and to become comfortable working with real data.

In Dr Walther’s part of the course, lectures are on the nature and the fragility of financial intermediation. It serves as a framework to understand the sources of risks in running of a financial institution. It covers the purpose of the risk management, institutional details of financial institutions and their special functions, models of financial institutions: H-T model of leverage and D-D model of liquidity transformation, models of liquidity and (inside/private) money creation by financial intermediations. This part of the course also covers regulations of financial institutions.

60 hours of seminars in the AT.

Students will be given weekly problem set assignments.

For Dr Danielsson's section, no single text covers the course material. The relevant sections of the following readings would be appropriate for individual topics: Jon Danielsson (2011), Financial Risk Forecasting, as well as slides from www.financialriskforecasting.com/slides/. Other background reading is Ruey Tsay (2010), Analysis of Financial Time Series; Peter Christoffersen (2003), Elements of Financial Risk Management.

Dr Walther's part of the course will consider the following readings: J. Hull, Risk Management and Financial Institutions. 2nd Edition; S Dawson, Analysing Organisations (Macmillan, 1996); S French, Readings in Decision Analysis (Chapman and Hall, 1989); C Hood & D K Jones, Accident and Design (UCL Press, 1996); P Jorion, Value At Risk 3rd Edition 2007 (McGraw Hill); M.Power. Organized Uncertainty: Designing a World of Risk Management (Oxford University Press, 2007); M.Fenton-O'Creevy, N.Nicholson, E.Soane and P. Willman, Traders: Risks, Decisions, and Management in Financial Markets (Oxford University Press, 2005); B A Turner & N F Pidgeon, Man-made Disasters (Butterworth-Heinemann, 1997). The Economics of Climate Change: The Stern Review (Cambridge University Press, 2007).

Lecture Notes

Continuous assessment (100%).

One homework, group presentation, thesis and exam.

A substantial (10,000 word) thesis, due in August, is an integral part of the course and represents 50% of the assessment.