The purpose of the class is to introduce students to the topic of financial risk management and to the use of financial derivatives in order to hedge risks. Students should the able to identify, measure and manage, especially (but not exclusively) market risks and credit risks. In order to apply the concepts on concrete examples and real data, the software package "R" will be used.
Students will learn concepts:
(A)
structure and mechanics of OTC and exchange markets
(B)
(coherent) risk measures
(C)
market risk: bond fundamentals, derivatives, introduction to market
risk, sources of market risk (interest rate risks, equity risks,
currency risks, commodity risks), hedging linear risk (forwards,
futures, swaps), nonlinear risk (options), modeling risk factors,
Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR or expected
shortfall), VaR mapping, historical and parametric VaR estimation,
back testing, stress testing and scenario analysis.
(D)
credit risk: introduction to credit risk, actuarial default risk
(credit rating), default risk from market prices (Merton model, bonds
with embedded prices), credit VaR, expected and unexpected credit
losses, credit derivatives,
(E)
liquidity risk
(F) Climate risk
will be discussed.
- Instructor: Alex Weissensteiner