This course introduces the importance of financial risk management by developing practical risk measurement tools. The risk measurement aspect of the course begins with the development of the Value-at-Risk (VaR) methodology for financial instruments traded in open markets including equities, bonds, foreign currencies and their derivatives. The course develops analytic VaR models for instruments with non-linear payoffs and non-normal distributions and it also develops simulation methodologies for risk analysis. Statistical tools in volatility forecasting, tail events, and expected shortfall are introduced as appropriate. The emphasis of the course is on market risk, but in addition to the traditional analysis of trading rooms, the course also considers regulatory and compliance risk, corporate risk and risk analysis for investment managers.
[(MSF 504 with min. grade of C, MSF 505 with min. grade of C, and MSF 506 with min. grade of C)]