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Risk Management in Financial Institutions (CF30852)

General information

Type:

OP

Curs:

1

Period:

S semester

ECTS Credits:

2 ECTS

Teaching Staff:

Group Teacher Department Language
Santiago Forte Arcos Economía, Finanzas y Contabilidad ENG

Prerequisites

Core and Specialized-Compulsory Courses of the MSc in Finance.
The course is restricted to MSc in Finance students.

Previous Knowledge

Matrix algebra: product of matrices.
Statistics: mean, variance and probability distribution.
Financial theory: CAPM.

Course Learning Objectives

The course provides a comprehensive description and analysis of risk management in financial institutions. Its main focus is on modern technical tools for measuring and managing market and credit risk.

Competences

9. Adaptability, flexibility

Relation between Activities and Competences

9
Exercises to be given in every week  
Final exam  

CONTENT

1. Introduction

2. Market Risk

2.1. Introduction
2.2. Sensitivity Analysis
2.3. The Value at Risk (VaR) concept
2.3.1. Definition
2.3.2. Advantages of VaR as a measure of market risk
2.4. Calculating VaR
2.4.1. First approximation: parametric VaR
2.4.2. The Variance-Covariance approach
2.4.3. The Delta - Normal approach
2.4.4. The Montecarlo Approach
2.4.5. The Historical Simulation approach
2.4.6. Comparison of the different methods
2.5. VaR extensions: Incremental VaR and DeltaVaR
2.6. VaR in practice
2.6.1. Mapping
2.6.2. Back-Testing and Stress-Testing

3. Credit Risk

3.1. Introduction
3.2. Single name credit risk: Default probabilities
3.2.1. Risk rating systems
3.2.2. Econometric models
3.2.3. Contingent claim models
3.3. Portfolio credit risk: CreditVaR
3.3.1. CreditMetrics
3.3.2. Other methodologies

Relation between Activities and Contents

1 2 3
Exercises to be given in every week      
Final exam      

Methodology

The course combines theoretical and practical sessions.

ASSESSMENT

ASSESSMENT BREAKDOWN

Description %
Exercises to be given in every week 25
Final exam 75

Assessment criteria

Ordinary Evaluation

The evaluation criteria has two components:

1. Individual homeworks (25%)
2. Final exam (75%)

To pass the course it is required a minimum score of 5 both in the final exam and in the average (applying the above weights). The grading criteria could be summarized as follows: if the the final exam grade and the average grade are both above 5, then the final grade is the average; otherwise the final grade is the minimum between the final exam grade and the average grade.

Retake

In case a retake exam is needed, the grade will be 100% determined by the retake exam grade.

Bibliography

Textbooks:
- Down, K. "Beyond Value at Risk". John Wiley and Sons, 1998.
- Crouhy, M.; Galai, D.; and Mark, R. "Risk Management". McGraw-Hill, 2001.
Other required material:
- Hull, J.C. "Options Futures and Other Derivatives". Fourth edition. Prentice Hall, 2000.
- Bodie, Kane and Marcus. "Investments". McGraw-Hill, 2011.

Timetable and sections

Group Teacher Department
Santiago Forte Arcos Economía, Finanzas y Contabilidad

Timetable

From 2019/4/26 to 2019/5/31:
Each Friday from 12:00 to 15:00.

Friday 2019/6/7 from 8:45 to 11:45.