Course syllabus

Värdering och hantering av finansiell risk
Financial Valuation and Risk Management

EXTQ35, 7,5 credits, A (Second Cycle)

Valid for: 2021/22
Faculty: Faculty of Engineering, LTH
Decided by: PLED I
Date of Decision: 2021-04-21

General Information

Elective for: F4, F4-fm, I4-fir, Pi4-fm
Language of instruction: The course will be given in English

Aim

The objective of this course is to give the students an understanding and hands on knowledge of basic methods within risk management.

Learning outcomes

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,

 

Contents

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.

Examination details

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.

Admission

Admission requirements:

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

Reading list

Contact and other information

Course coordinator: Docent Birger Nilsson, birger.nilsson@nek.lu.se
Course homepage: http://www.nek.lu.se
Further information: Identical to NEKN83