Course co-ordinator(s): Dr Marcus C Christiansen (Edinburgh).
Aims:
To provide: an introduction to the advanced statistical methods underpinning Financial Risk Management (FRM) and Enterprise Risk Management (ERM); a thorough grounding in the wide range of risks facing a company. To develop key risk assessment skills.
Summary:
This course will give students an introduction to the risk measurement and management process. We will see how financial institutions are faced with a bewildering array of risks of all types. Some of the course will focus on risks that are amenable to rigorous statistical analysis, and about the process of selecting a good statistical model for forecasting the future. In isolation, students will be familiar with the individual components of an analysis. The course pulls all of these together to look at the modelling process as a whole and as one part of the bigger risk management control cycle. Essential elements of the learning and feedback process are the computer labs where we turn classroom theory into practice. For MSc students only, the course will also look at different sources of credit risk and briefly look at the different approaches to modelling credit risk.
Detailed Information
Pre-requisite course(s): F78PB Probability and Statistics B & F79PA Portfolio Theory & Asset Models .
Location: Edinburgh.
Semester: 1.
Syllabus:
- Introduction
- What is ERM and why is it worthwhile
- Direct and indirect stakeholders in an enterprise
- Different types of risk
- Quantitative analysis of financial data
- Quantifiable and non-quantifiable risks
- Modelling univariate financial time series; model fitting and diagnostic tests
- Extreme value theory
- Econometric models for stochastic volatility
- Modelling multivariate risks including the use of copulas
- Risk measures; coherent risk measures
- Scenario analysis and stress testing
- Model and parameter risk
- Contagion and credit risk (MSc students only)
- Different sources of credit risk; contagion
- Corporate bonds and components of credit spreads
- Different theoretical and commercial approaches to modelling credit risk
Much of the course will focus on a small number of financial risks that banks and insurers are exposed to. We will discuss how these risks can be analysed and the methods discussed in lectures will be implemented in the weekly computer labs.
Assessment Methods:
2-hour exam (80%) at the end of the 2nd semester, project work (20%).
SCQF Level: 11.
Credits: 15.
Other Information
Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer
VISION: further information and course materials are available on VISION