MVE220 / MSA400 Financial risk Spring 25
This course covers some modern techniques and concepts for measuring risk in a financial setting. It requires no prior knowledge of finance, but is quite mathematical.
This page contains the program of the course: lectures and projects. Other information, such as learning outcomes, teachers, literature and examination, are in a separate course PM.
Literature
Stuart Coles, Introduction to Statistical Modeling of Extreme Values. Available in STORE or here. We will mainly cover 2.6.3-4, 2.6.7, 2.7, 3.1-4, 4. Everything related to profile likelihood is omitted.
Carl Lindberg, Lecture notes:
Comment on Structural Credit Risk 20231211.pdf
ExtremeValueTheory 20240306.pdf
Fisher Information 20240123.pdf
Risk Project Slides
Old exams
Program
The schedule of the course is in TimeEdit.
Lectures
| Week | Topic | Content |
|---|---|---|
| 1 | Introduction to Financial Risk, Extreme value theory | Derivation of the extreme value distributions and the Generalized Pareto Distribution |
| 2 | Statistical Modeling: Classical EVT with Statistics, Threshold models, Value-at-Risk, Expected shortfall | Distributions, independence, Fisher Information |
| 3 | Week 2 continued, Risk projects | General EV distributions with statistics |
| 4 | CHARM days, Risk project presentations | Generalized Pareto distribution, Peaks over Threshold |
| 5 | Insurance risk, structural Credit risk | Cramér-Lundberg model, structural credit risk models |
| 6 | Markov Theory, Credit risk | Basic properties, hitting times, Strong Markov property, invariant distributions, Markov based credit risk models. |
| 7 | Project supervision | |
| 8 | Project supervision |
Recommended exercises
Learn all the derivations and examples covered in the lectures.
Statistical project
All students will, in groups of 2, apply the GEV and PoT models to financial data, e g from a stock or an equity index, along the lines of the example statistical analysis in Coles. The students should in the PoT case calculate VaR and Expected Shortfall for their time series, given an investment of 1 million "moneys" (I e, use SEK if you analyze Swedish stocks, USD if you analyze American stocks, and so on..). I will supervise these projects during weeks 6-8. Each group will present their projects to me in class. The projects are MANDATORY, but they are also quite relevant to the exam. The projects may be done in a programming language, or tool, of your choosing.
Presentation risk project
Groups of (ideally) 2 people will some time during study weeks 7-8 present a topic related to financial risk (such as the Madoff scandal, Enron, LTCM, the Financial Crisis) during a 10 minute presentation. The presenting groups will hand in 1-2 pages (ChatGPT-tools are allowed, but check your facts!) The best presentations will be rewarded in the sense that I will choose exam questions from their presentations, so doing the project can be regarded as studying for the exam. The presentation and handing in of a report is MANDATORY.
Course summary:
| Date | Details | Due |
|---|---|---|