37009 Risk Management

Description

Designed specifically for quantitative finance students, this subject provides disciplinary knowledge in the area of risk management by providing a comprehensive and rigorous exposition of the theory and practice of financial risk measurement and management. It focuses on the tools and techniques for identifying, measuring and managing risk. It covers the value-at-risk (VaR) measure and expected shortfall (ES) risk measures, which form the basis of risk measurement and management in current financial regulation such as Basel II, Basel III, and Solvency II. Parametric and non-parametric techniques, including historical and Monte Carlo simulation, to calculate or approximate risk measures are covered in depth.

This subject discusses the axiomatic theory of risk measures and the relevance of these axioms/properties to financial risk management. Furthermore, in view of emerging evidence of the intricate interplay of risk factors relevant to financial risk management, this subject also tackles more general notions of dependence beyond (linear) correlation. To more accurately model the dependence structure between risk factors, copulas are discussed in depth and applied to the calculation of risk measures.

The risk modelling and management concepts are then applied extensively to the analysis of market risk and operational risk among others.

The combination of theory, practical examples, and complex problems presented throughout the subject promote enquiry and critical thinking. Innovation and creativity are required to successfully solve the problems in the assessment tasks. Communication skills are also honed to enable students to clearly and concisely explain the methods used and the results obtained in the process.