Syllabus academic year 2008/2009
(Created 2008-07-17.)
FINANCIAL VALUATION AND RISK MANAGEMENTTEK180

Higher education credits: 7,5. Grading scale: TH. Level: A (Second level). Language of instruction: The course will be given in English. TEK180 overlap following cours/es: NEK725 och NEKM41. Compulsory for: I4fi. Optional for: F4, F4sfm, I4, M4, Pi4, Pi4fm, RH4, INEK4. Course coordinator: Professor Björn Hansson, bjorn.hansson@nek.lu.se, Nationalekonomiska inst. Assessment: The students are evaluated in a written exam. Mandatory laboratory tasks are also required. Home page: http://www.nek.lu.se.

Aim
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

Skills and abilities
For a passing grade the student must

· be able to implement VaR (Value-at-Risk)

· identify the interesting finance-related problems in the real-world and to incorporate adequate methods and theories to analyse these problems

Judgement and approach
For a passing grade the student must

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,

· an ability to independently conduct a master thesis.

Contents
The course deals with three main topics: portfolio theory, measurement and management of credit risk, and measurement and management of financial risk. The objective of this course is to give the students an understanding and hands-on knowledge of basic methods within risk management. The course begins with MV-optimization with different constraints and stochastic dominance. Then follows measurement and control of credit risk, which are then applied to the Basel II rules. Finally, the course covers VaR (Value-at-Risk) and CVaR/ETL (Conditional Value-at-Risk/Expected Tail Loss), which are computed for different portfolios with and without derivatives using analytical and simulation based techniques.

Literature
Crouhy, Michael, Dan Galai och Robert Mark (2000): Risk Management, McGraw-Hill
Saunders, Anthony och Linda Allen (2002): Credit Risk Management, Wiley
Kompletterande material