QF435 Risk Management for Capital Markets

Course Catalog Description


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.

Campus Fall Spring Summer
On Campus X X
Web Campus


Professor Email Office
Dan Pirjol
dpirjol@stevens.edu Babbio 303A
Stephen Taylor

More Information

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)

Course Resources


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%

Lecture Outline

Topic Reading
Week 1 Introduction: risk and return Chapter 1
Week 2 Financial institutions: Banks, insurance companies, mutual funds, and hedge funds Chapters 2, 3, 4
Week 3 Financial instruments and their valuation Chapters 5, 7
Week 4 Interest rate risk Chapter 9
Week 5 Risk and its hedging Chapter 8
Week 6 Volatility and correlation Chapters 10, 11
Week 7 Value-at-risk and expected shortfall Chapter 12
Week 8 Computing market risk VaR Chapters 13, 14
Week 9 Bank regulatory capital: Basel rules Chapters 15, 16
Week 10 Derivatives trading regulation Chapters 17, 18
Week 11 Credit risk Chapters 19, 20
Week 12 Operational risk and stress testing Chapters 22, 23
Week 13 Liquidity risk and model risk Chapters 24, 25
Week 14 Economic capital, Enterprise Risk Management Chapters 26, 27
Week 15 Review