Introduction

This course offers an overview of the basics of financial risk management for the main financial institutions: banks, investment funds and insurance companies. The course will introduce the main financial products traded in the financial markets, define their risks, and describe how they are used by traders to measure and mitigate risk. The course will cover the basic types of risk: market risk, credit risk, model risk and liquidity risk. The statistical properties of the markets will be introduced, through the concepts of volatility and correlation of returns. The main risk measures are introduced - Value at risk and expected shortfall – and their estimation is described. The course will give an overview of regulation of financial markets and economic capital risk management.

Course Outcomes

By the end of this course, the students will be able to:

1. Market Quotes of Major Asset Classes
2. Risk Types of Major Asset Classes
3. Statistical Analysis of Financial Data for Risk Management
4. Stochastic Processes and Risk Measures (VAR, CVAR)

Textbook

John Hull, Risk management and financial institutions, Fifth Edition. Wiley 2018

Additional References

Rupak Chatterjee, Practical methods of financial engineering and risk management, Stevens Series in Quantitative Finance 2014

Grading Policies

Assignments: Assignments will be provided throughout the semester, consisting of problems related to the material taught in the lectures. They are to be handed in on time. No late assignments, without prior approval, will be accepted. There is a final exam. The total grade is a weighted average of the attendance, assignments, in-class quizzes and final exam.

The assignments and their weights are as shown below:

• Participation/Class challenges - 10%
• Assignments - 30%
• In-class quizzes - 30%
• Final Exams - 30%
TOTAL - 100%