Syllabus academic year 2008/2009
(Created 2008-07-17.)
FINANCIAL STATISTICSFMS161

Higher education credits: 7,5. Grading scale: TH. Level: A (Second level). Language of instruction: The course will be given in English on demand. FMS161 overlap following cours/es: MAS229, MAS229 och MASM18. Compulsory for: I4fi. Optional for: D4, F4, F4sfm, L4fa, M4, Pi4, Pi4fm, RH4, INEK4. Course coordinator: Director of studies, Anna Lindgren, anna@maths.lth.se, Matematisk statistik. Recommended prerequisits: MIO140 Financial Management, FMS045 Stationary stochastic processes, and preferrably also one or several of FMS051 Time series analysis, TEK180 Financial Valuation and Risk Management, and FMS170 Valuation of Derivative Assets. Assessment: Written report and oral presentation of a larger project and compulsory computer exercises. The course grade is based on the project grade. Further information: The course is also given at the faculty of science with the code MASM18. Home page: http://www.maths.lth.se/matstat/kurser/fms161mas229/.

Aim
The course should be regarded as the statistical part of a course package also including TEK180 Financial Valuation and Risk Management and FMS170 Valuation of Derivative Assets. Its purpose is to give the student tools for constructing models for risk valuation and pricing, based on data.

Knowledge and understanding
For a passing grade the student must

Skills and abilities
For a passing grade the student must

Contents
The course deals with model building and estimation in non-linear dynamic stochastic models for financial systems. The models can have continuous or discrete time and the model building concerns determining the model structure as well as estimating possible parameters. Common model classes are, e.g., GARCH models with discrete time or models based on stochastic differential equations in continuous time. The course participants will also meet statistical methods, such as Maximum-likelihood and (generalised) moment methods for parameter estimation, kernel estimation techniques, non-linear filters for filtering and prediction, and particle filter methods.

The course also discusses prediction, optimization, and risk evaluation for systems based on such descriptions.

Literature
Madsen, H, Nielsen, J N, Lindström, E, Baadsgaard, M & Holst, J: Statistics in Finance. IMM, DTU, Lyngby and KFSigma, Lund 2006.