IB9JR-20 Financial Markets and Financial Risk Management
Introductory description
The aim of this module is to give an introduction to the financial markets and instruments as well as the analysis and management of risk within financial markets.The objective is to develop a conceptual framework for thinking about financial markets and financial risk, and to show how these concepts are implemented in practice in a variety of contexts.
Module aims
First, the module gives an overview of the markets and instruments as well as risk management tools in the context of portfolios of fixed income securities, equities, foreign exchange, derivatives, and housing markets, respectively. Next, we discuss the implementation and the merits of risk measures, e.g., Value at Risk and Expected Shortfall. Furthermore, we introduce the concept of endogenous risk and discuss the relevance of limits to arbitrage. In the context of credit risk we will cover ratings based and structural models, as well as credit risk on portfolios and credit derivatives. A final topic covers regulation and the recent credit crisis. Some limitations of current approaches are also discussed.
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.
Introduction to financial markets
Interest rates and term structure
Central banks and financial markets
Financial intermediation and business models for banks/insurers
Money, bond, FX and equity markets
Basic principles of risk management
Financial instruments
Limits to arbitrage and the funds industry
Hedging in financial markets
Risk measures
Credit risk and credit derivatives
The housing market and mortgage-based securities
Rare events and regulatory responses
Learning outcomes
By the end of the module, students should be able to:
- Demonstrate an in depth understanding of Financial Markets and Financial Risk Management in central banking.
- Demonstrate a systematic understanding of foreign exchange markets and how the foreign exchange risk is managed.
- Demonstrate a systematic understanding of the role and importance of financial risk management in theory and in practice.
- To develop an understanding of financial risk management in banks and insurers, when operating domestically and internationally.
- Demonstrate a critical awareness of research and advanced scholarship in the area of financial markets and risk management.
- Reflect on and learn from some prior experience and thus be able to integrate new knowledge with past experience and apply it to a new situation.
- Make sound judgements whilst understanding the limitations on judgements made in the absence of complete data.
Indicative reading list
The main textbooks for the course are:
Mishkin, F. S. and S. G. Eakins, 2017 (ME). Financial markets and Institutions. Pearson Education, Global Edition (9th)
John C. Hull, Risk Management and Financial Institutions, Wiley, 2018, 5th edition.
Other recommended textbooks are:
Michel Crouhy, Dan Galai and Robert Mark, Risk Management, McGraw-Hill, 2001.
Jon Danielsson, Financial Risk Forecasting, Wiley, 2011.
Pietro Veronesi, Fixed Income Securities: Valuation, Risk, and Risk Management, Wiley and Sons, 2010.
A number of additional readings will be assigned for individual lessons.
Subject specific skills
Demonstrate the ability to apply knowledge of financial risk management to other areas of central banking.
Demonstrate an ability to acquire and analyse data and information, and to evaluate its relevance and validity to topics in financial risk management.
Draw on a range of concepts, information, techniques and perspectives in financial risk management.
Demonstrate an ability to conduct research into foreign exchange markets that require familiarity with FX data, research sources and appropriate methodologies.
Transferable skills
Written communication
Independent learning
Study time
| Type | Required |
|---|---|
| Online learning (scheduled sessions) | 4 sessions of 1 hour (3%) |
| Private study | 136 hours (97%) |
| Total | 140 hours |
Private study description
136 hours of independent learning a mixture of asynchronous content including forums, quizzes and guided readings (13.5 hrs x 9 lessons, plus 14.5 hrs x 1 lesson).
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group B
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
|||
| Locally-timetabled online examination | 100% | No | |
Reassessment component is the same |
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Feedback on assessment
TBC
There is currently no information about the courses for which this module is core or optional.