Market Risk Management

• Credit value: 15 credits at Level 7
• Tutor: Ilaria Peri
• Assessment: a two-hour examination (80%) and coursework (20%)

This module provides an understanding of the different reasons for (and approaches to) measuring market risk. You will gain fundamental knowledge of the mathematical and statistical theory behind the subject and be able to apply this to solve real-world problems.

Indicative module content

• Properties of financial time series
• Value at Risk and related measures for portfolios of standard assets
• Risk factor models - strengths and weaknesses
• Value at Risk for derivative portfolios
• Time series analysis for risk managers
• Extreme Value Theory and its applications in finance

By the end of this module, you will be able to:

• measure financial losses
• demonstrate a sound theoretical knowledge of Value at Risk (VaR) and Tail Value at Risk (TVaR)
• compute VaR and TVaR (under certain distributional assumptions) for a given portfolio of risky assets
• employ statistical tools to examine the stylised facts of asset returns
• build and use risk models featuring jumps and stochastic volatility
• demonstrate sound knowledge of the GARCH family of risk models and its applications
• compute VaR for derivatives
• use extreme value theory applied to VaR and TVaR calculations
• measure risk using simulation methods
• statistically evaluate a given risk model using back-testing techniques.