Faculty
Peter Feldhütter

Course Coordinator
Niels Christian Nielsen

Completed bachelor degree in business

The aim of the course is to describe the risk management process from the perspective of financial institutions as the process by which various risk exposures are identified, measured, and controlled. Value-at-Risk is a quantitative risk management tool that has been developed to facilitate the assessment and communication of financial risks. The course offers a comprehensive presentation of theoretical as well as practical aspects underlying the measurement and application of Value-at-Risk.

The course will motivate and discuss the need for financial risk management in light recent financial scandals and disasters and in relation to international capital adequacy requirements for banks and other financial institutions. As modern capital requirements rely increasingly on Value-at-Risk we will take a detailed look at this quantitative risk measurement tool. The course will go through all of the steps necessary for computing reliable Value-at-Risk numbers, e.g. parameter estimation, volatility modelling, back-testing, stress-testing, Monte Carlo and historical simulation techniques. Thoughout the course we will give special attention to how derivative instruments can affect Value-of-Risk for portfolios and thus be actively used in the process of managing financial market risks.

Individual 4-hour written, closed book exam.

Lectures with exercises.