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DRPS : Course Catalogue : School of Mathematics : Mathematics

Postgraduate Course: Financial Risk Management (MATH11046)

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
SummaryTypically a bank decomposes its business risk into credit, market, operational, interest rate risk and strategic risk. Each major risk is then subdivided into more detailed categorizations of risk. This course will present a parameteric model-based approach to these risks and show how these can be used to diversify risk. The course is practically oriented with many illustrations and computing labs sessions where the students develop examples of financel risk models.

Introduction: Analysis of risks in the banking sector, Financial engineering, the parameteric model-based approach, correlations and diversification of risk.

Basel II: capital adequacy based on mathematical models, Interest risk and ALM (Asset and Liability Management).

Market Risk: Value at Risk models (Historical simulation, Monte Carlo simulation, Risk Metrics, Markowitz mean-variance, the Sharpe ratio (i.e. CAPM model), conditional VAR), Portfolio hedging (Option pricing
models, Trading systems, Delta, Gamma and other types of hedging).

Credit risk: Rating/Pricing models, The notions of expected and unexpected losses, Credit risk modelling.

Operational risk: The nature of qualitative risks, The method of loss distribution, The scorecard approach.

Model risk: Danger of applying models in inapropriate situations.

Stress testing: Extreme event theory and simulating rare and catastrophic events.

Conclusions: Towards integrated risk management.
Course description Not entered
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Students MUST have passed:
Co-requisites
Prohibited Combinations Other requirements None
Course Delivery Information
Not being delivered
Learning Outcomes
Ability to assess risk in financial decision problems and construct appropriate financial risk models.
Reading List
None
Additional Information
Course URL http://student.maths.ed.ac.uk
Graduate Attributes and Skills Not entered
KeywordsFRM
Contacts
Course organiserDr Julian Hall
Tel: (0131 6)50 5075
Email: J.A.J.Hall@ed.ac.uk
Course secretaryMrs Frances Reid
Tel: (0131 6)50 4883
Email: f.c.reid@ed.ac.uk
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