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DEGREE REGULATIONS & PROGRAMMES OF STUDY 2019/2020

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DRPS : Course Catalogue : School of Mathematics : Mathematics

Postgraduate Course: Financial Risk Theory (MATH11132)

Course Outline
SchoolSchool of Mathematics CollegeCollege of Science and Engineering
Credit level (Normal year taken)SCQF Level 11 (Postgraduate) AvailabilityNot available to visiting students
SCQF Credits10 ECTS Credits5
SummaryThis course presents approaches to model various financial risks. The
purpose is to learn the basic underlying mathematical concepts, to understand the economic rationale behind them through simple examples and to get an idea about how these methods can be implemented in practice.
Course description - Mean and variance. A quick look at Markowitz portfolio theory.
- Utility functions, certainty equivalent.
- Value-at-risk, calculation methods (historical, Monte Carlo). Drawbacks.
- Convex and coherent risk measures, examples.
- Measures of dependence: from covariance to copulas.
- Some statistical techniques (dimension reduction, factor analysis).
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Students MUST have passed: Probability, Measure & Finance (MATH10024) OR Stochastic Analysis in Finance (MATH11154)
Co-requisites
Prohibited Combinations Other requirements The central point of this course (FRT) is built around risk measures. It is thus required that anyone taking this course needs to have a solid understanding of the concept of Equivalent Martingale Measures (and of the associated theory - Girsanov theorem; Radon-Nikodym derivative; Lebesgue integration).

At UG level, the above topics are taught in MATH10024 Probability, Measure and Finance. At PGT level, they are taught in MATH11154 Stochastic Analysis in Finance.
Course Delivery Information
Academic year 2019/20, Not available to visiting students (SS1) Quota:  None
Course Start Semester 2
Timetable Timetable
Learning and Teaching activities (Further Info) Total Hours: 100 ( Lecture Hours 18, Seminar/Tutorial Hours 4, Summative Assessment Hours 3, Programme Level Learning and Teaching Hours 2, Directed Learning and Independent Learning Hours 73 )
Assessment (Further Info) Written Exam 100 %, Coursework 0 %, Practical Exam 0 %
Additional Information (Assessment) Examination: 100%
Feedback Not entered
Exam Information
Exam Diet Paper Name Hours & Minutes
Main Exam Diet S2 (April/May)Financial Risk Theory (MATH11132)2:00
Learning Outcomes
On completion of this course, the student will be able to:
  1. Demonstrate knowledge of, and a critical understanding of, Markowitz portfolio theory.
  2. Demonstrate knowledge of, and a critical understanding of, the utility functions theory.
  3. Demonstrate knowledge of, and a critical understanding of, the Value-at-risk approach.
  4. Demonstrate understanding of, and critical assessment of, different convex and coherent risk measures.
  5. Demonstrate understanding of, and critical assessment of, different measures of dependence.
Reading List
- Follmer-Schied: Stochastic finance, Walter de Gruyter, 2004.
- Embrechts-Frey-McNeil: Quantitative risk management, Princeton University
Press, 2005.
Additional Information
Graduate Attributes and Skills Not entered
Special Arrangements MSc Financial Modelling and Optimization, MSc Mathematics and MMaths students only.
KeywordsFRT
Contacts
Course organiserDr Sotirios Sabanis
Tel: (0131 6)50 5084
Email: S.Sabanis@ed.ac.uk
Course secretaryMiss Gemma Aitchison
Tel: (0131 6)50 9268
Email: Gemma.Aitchison@ed.ac.uk
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