Market Risk and Credit Risk
Risk is closely related with profitability. This curricular unit presents risk measures, both in financial and in credit markets, along with the discussion of methodologies for their quantification, including scoring, rating and prediction of bankruptcy. Stress tests are also addressed and the analysis of pension funds is carried out resorting, in particular, to actuarial and risk assessment models.
Joaquim Amaro Graça Pires Faia e Pina Catalão Lopes, Marta Cristina Vieira Faias Mateus
Weekly - 4
Total - 54
There is not any prerequisite.
Duffie, D. and Singleton, K., 2003, Credit Risk:Pricing, Measurement, and Management, Princeton University Press
Gourieroux, C. and Jasiak, J., 2007, The Econometrics of Individual Risk: Credit, Insurance, and Marketing, Princeton University Press
Hull, J., 2015, Options, Futures, and Other Derivatives, Prentice Hall.
Hull, J., 2012, Risk Management and Financial Institutions, Wiley.
Jorion, P., 2007, Value at Risk - The New Benchmark for Managing Financial Risk, McGraw-Hill.
McCullaugh, P. and Nelder, J., 1989, Generalized Linear Models, Chapman and Hall.
Turkman, M. and Silva,G., 2000, Modelos Lineares Generalizados – da Teoria à Prática, Edições SPE
Vose, D., 2008, Risk Analysis - A Quantitative Guide, John Wiley & Sons.
Winklevoss,H., 2002, Pension mathematics with numerical illustrations; Pension Research Council, Wharton School
During the course additional material may be included.
Theory-practice lectures involving theory with applications, allowing for a deeper understanding of the concepts along with specific aspects of the data and methodological issues in Risk and Finance. A particularly important part of these lectures are the presentations, followed by respective discussion, of the students research works.
Evaluation methods are, alternatively:
- Continuous, with three written research works, eventually discussed, one on pension funds and actuarial valuation models -25% in final grade-, another subdivided into risk of credit and risk-return in financial market -40% in final grade-, and a third on statistical foundations, tail risk and transmission, namely VaR and Copula models -35% of final grade. Approval requires a final grade of 9.5 values (no minimum score on items). Delivery, and eventual discussion, of each work take place when the respective part of the material is finished;
- Final exam without consultation on the whole material, whose grade weighs 100% of final grade, with minimum passing grade of 9.5.
Attention: “Melhoria”/improving the final grade requires the own Exam, on the whole material, which score weights 100% of the grade.
3.Volatility and Correlation
5.Credit risk: scoring, default, rating
6.Interest rate risk
9.Pension Funds: Pay as you Go and Pay as you Earn Systems, Pension Plans and Funds Concepts, Actuarial Valuation - Projected Unit Credit Method, Management of Funds, ALM Risk Measurement
Programs where the course is taught: