Valid for: 2022/23
Faculty: Faculty of Engineering, LTH
Decided by: PLED I
Date of Decision: 2022-04-11
Elective for: F4, F4-fm, I4-fir, Pi4-fm
Language of instruction: The course will be given in English
The objective of this course is to give the students an understanding and hands on knowledge of basic methods within risk management.
Knowledge and understanding
For a passing grade the student must
The goal of the course is to develop the students’
understanding of models for financial risk management and their
ability to apply these models to real word problem. More
specifically, the students upon completion of the course shall have
the ability to understand:
• VaR (Value-at-Risk),
• ES (Expected shortfall),
• Market risk,
• Credit risk,
• Basel regulations,
• Interest rate swaps (IRS) and swaptions,
• Credit Default Swaps (CDS).
Competences and skills
For a passing grade the student must
Students shall have the ability to independently apply their
knowledge to real world problems. In particular they shall be able
to:
• implement methods for estimating VaR and ES,
• implement tests for evaluating the quality of VaR and ES
estimators,
• implement methods for estimating credit risk,
• implement methods for pricing interest rate swaps and CDS,
• identify the finance-related problems in the real-world and to
incorporate adequate methods and theories to analyse these
problems,
• conduct a clear and pedagogical report of their own and
others’ empirical analyses.
Judgement and approach
For a passing grade the student must
Students shall have developed:
• learning skills that allow for further study in finance and
economics,
• an ability to independently search for and evaluate information
from risk management literature within finance,
The objective of this course is to give the students an understanding and hands-on knowledge of fundamental methods within financial risk management. The course deals with two main topics: measurement and management of market risk and measurement and management of credit risk. The course begins with an overview of risk management in general with the Basel legislation as a real world backdrop. This is followed by a discussion of the theoretical properties of risk measures, in particular VaR (Value-at-Risk) and ES (Expected shortfall). The course continues with practical aspects and implementation of methods used to actually measure VaR and ES. This is followed by a general discussion of credit risk and to apply models to measure credit risk. A major part of the course will focus on the management of credit risk by using derivative instruments such as interest rate swaps, swaptions, and CDS, as well as pricing these instruments.
Grading scale: TH - (U,3,4,5) - (Fail, Three, Four, Five)
Assessment: The students are evaluated in a written exam. Mandatory laboratory tasks are also required.
The examiner, in consultation with Disability Support Services, may deviate from the regular form of examination in order to provide a permanently disabled student with a form of examination equivalent to that of a student without a disability.
The number of participants is limited to: 60
Selection: Completed university credits within the programme. Priority is given to students enrolled on programmes that include the course in their curriculum.
The course overlaps following course/s: TEK180, NEKM41, NEKN83
Course coordinator: Anders Vilhelmsson, anders.vilhelmsson@nek.lu.se
Course homepage: http://www.nek.lu.se
Further information: Identical to NEKN83