Introductory description

This module is designed to provide introduction and in-depth understanding of risk management. The objective of the course is to build the toolkits for measuring risk. The course will also help students develop better understanding for real-world problems.

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

1. Financial risk management regulatory framework: Basel II (and Solvency II)
2. Risk management and risk measurement
3. Market risk
4. Credit risk
5. Operational risk
6. Firm level risk management: economic capital, capital allocation, RAROC

Learning outcomes

By the end of the module, students should be able to:

• Know the regulatory framework of financial risk management.
• Identify the financial risks a firm is subject to.
• Have the theoretical knowledge to quantify the identified risks.
• Choose the appropriate technique to employ according to the nature of the risk and the regulatory guidelines.
• Perform a critical analysis of the results obtained with the quantitative techniques.

Indicative reading list

Hull, John C. (2018) Risk Management and Financial Institutions: Wiley.
Crouhy, M, Galai, D & Mark, R. 2001. Risk Management. McGraw-Hill, New York.
Hull, John C. (2002) Fundamentals of futures and options markets, 4th ed., Upper Saddle River: Prentice-Hall.
Jorion, P. 2001. Value at Risk: the New Benchmark for Measuring Financial Risk. McGraw-Hill, New York.
Marrison, Christopher (2002) The Fundamentals of Risk Measurement, McGraw-Hill Education.
McNeil, A., Frey, R. and Embrechts, P. (2005) Quantitatice risk management: concepts, techniques and tools, Princeton University Press.

Subject specific skills

• Use computer software (Excel and EViews) to implement quantitative techniques to measure the different risks.
• Carry out market risk measurement, credit portfolio modelling and operational risk assessment.
• Produce risk measures as VaR, Economic capital and RAROC.
• Produce risk assessment reports at global level according to the regulatory guidelines.

Transferable skills

Find the financial markets data which are necessary for risk management in the internet and in databases.
Work in a team within a project.
Search for literature in the internet and in scientific publications, when a new problem arises.