Content

This course explains the ways in which risks are quantified and managed by financial institutions. The course first gives a typology of risk and explains the different risks a financial institution is exposed to. Once the risks are identified, we quantify these risks. To this end, we review the statistical tools used in a risk management context and implement different risk measures. We zoom in on the most widely used tool Value-at-Risk (VaR) and extensively evaluate this risk measure (both across different risk measure categories as well as within the VaR category). The course is structured as follows:

Part 1: Introduction to risk management

Part 2: Risk measurement

• Tools for measuring risks
• Volatility and comovement
• Value-at-Risk and Expected Shortfall

Part 3: Measuring market risk

• Market risk
• Market Value-at-Risk

Part 4: measuring credit risk

• Credit risk
• Credit Value-at-Risk

Part 5: Risk management in practice

• Stress testing and scenario analysis
• Regulation

Course material

Toledo is being used for this learning activity.

Recommended (but non-compulsory) readings:

• Hull, J.: Risk Management in Financial Institutions.
• Jorion, P.: Value-at-Risk.

Format: more information

Students are expected to follow the lectures and practice their knowledge and understanding of the material discussed via exercises. On Toledo, a discussion forum is opened where students can discuss the solutions to these exercises and the lecture material. This discussion is monitored by the lecturer. All modalities about the lectures are communicated via Toledo.

Throughout the course Excel is used to implement the risk measurement tools widely used in financial institutions. An assignment (part of the formal evaluation) further trains students on their skills to implement risk management theory for specific cases. The modalities of the assignment and deadlines are communicated via Toledo.