Syllabus academic year 2011/2012
(Created 2011-09-01.)
FINANCIAL VALUATION AND RISK MANAGEMENTTEK180
Credits: 7,5. Grading scale: TH. Cycle: A (Second Cycle). Main field: Technology. Language of instruction: The course will be given in English. TEK180 overlaps following cours/es: NEK725, NEKM41 and NEKN83. Optional for: F4, F4fm, I4, I4fir, M4, Pi4, Pi4fm. Course coordinator: Professor Björn Hansson, bjorn.hansson@nek.lu.se, Department of Economics. Prerequisites: Basic financial economics and statistics. The number of participants is limited to 60 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
Saunders, Anthony and Linda Allen (2010): Credit Risk Management In and Out of the Financial Crisis: new Approaches to Value at Risk and Other Paradigms, third edition, Wiley Finance
Dowd, Kevin (2004): Measuring Market Risk, second edition, Wiley Finance
Sharpe, William F.: Macro-Investment Analysis, www.stanford.edu/~wfsharpe/mia.mia.htm
Supplementary material
Recommended literature: Crouhy, Michael, Dan Galai and Robert Mark (2000): Risk Management, McGraw-Hill