Risk Management

Code

2225

Academic unit

null

Department

null

Credits

3,5

Teacher in charge

Afonso Eça

Teaching language

English

Objectives

This course is designed to train the students in evaluating and managing financial risk. The course deals mainly with market risk.

Prerequisites

N/A

Subject matter

Class 1 - What is risk?

Class 2 - Measuring market risk

Class 3 - VaR of a portfolio of stocks

Class 4 - Hedging a portfolio of stocks

Class 5 - Backtesting, monte carlo and stylized facts

Class 6 - VaR with bonds

Class 7 - VaR with bonds II

Class 8 - VaR with linear derivatives

Class 9 - VaR with non-linear derivatives

Class 10 - Portfolio VaR and forecasting

Class 11 - Stress testing and CVaR

Class 12 - VaR and Bank capital requirements

Bibliography

Textbook:

Jorion, P., 2006, Value at Risk, Mc Graw Hill, 3rd edition.
Other Readings:

Berkowitz, J., and J. O´Brien, 2002, How Accurate Are Value at Risk Models at Commercial Banks? Journal of Finance 57, 1093-1111.

Bloomberg Portfolio Value-at-Risk, 2011.

Jorion, P., 1997, Lessons from the Orange County Bankruptcy, Journal of Derivatives 4, 61-66.

Jorion, P., 2000, Risk Management Lessons from Long-Term Capital Management, European Financial Management 6, 277-300.

RiskMetrics - Technical Document, J. P. Morgan, 1996.

Return to RiskMetrics: The Evolution of a Standard, 2001.

The 2006 RiskMetrics Methdology, 2006.

Teaching method

Evaluation method

The course grade will be based on:

Case 1 (25%) due date 19th April

Case 2 (25%) due date 10th May

Final exam (50%): Closed book exam with exception of a double-side A4 sheet, which takes place on March 24. Passing grades in the course require a minimum grade of 9.5 in the final exam.

Courses

• Masters in Economics