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Mathematics 16:643:631 Mathematical Methods for Financial Risk Management

Schedule

The course is normally offered during the Fall semester.
  • Class meeting dates: Please visit the University's academic calendar.
  • Schedule and Instructor: Please visit the University's schedule of classes for the instructor, time, and room.
  • Instructor and Teaching Assistant Office Hours: Please visit the Mathematical Finance program's office hour schedule.

Course Abstract

This Risk Management course will encompass from both theoretical, quantitative and practical points of view all the major areas of a modern Financial Risk Management - Market Risk, Credit Risk, Liquidity Risk, Operational Risk, Model Risk, etc. with stressing out both quantitative, financial and procedural aspects and including Stress Testing, Backtesting, Quantitative Risk Management, etc. The suggested course structure is as follows:

1. Introduction - History of Risk Management and its vital importance in the current economic environment.
2. Creating a Risk Management culture in the financial organization and beyond.
3. Major types of Financial Risk (and corresponding Risk Management and Risk Analytics).
4. Enterprise Stress Testing and its role during a financial crises and afterwards. Pros and cons of its approaches.
5. Backtesting and its crucial importance in tackling financial crisis indicators. 6. Quantitative approaches in all major types of Risk Management with the goal of a single toolkit for all Risk Management.
7. Risk Reporting and its importance for Risk Management, Risk Technology, Risk Quants, Management and regulators.
8. Conclusion (perspectives of future development in all major areas of Risk Management and Risk Analytics).

Pre-requisites

Math 16:643:621 (Mathematical Finance I), Math 16:643:622 (Mathematical Finance II)

Textbooks

1. Phillippe Jorion, Value-at-Risk: The New Benchmark for Managing Financial Risk, latest edition.
2. John Hull, Risk Management And Financial Institutions, latest edition


Sakai

Recommended exam and grading schemes for MSMF courses are provided here, but the instructor will confirm the actual exam and grading scheme for the current semester.

Grading

Recommended exam and grading schemes for MSMF courses are provided here, but the instructor will confirm the actual exam and grading scheme for the current semester.

Class Policies

Please see the MSMF common class policies.

Weekly Lecturing Agenda

The lecture schedule below is a sample; actual content may vary depending on the instructor. Please see Sakai for current lecture schedule. Readings for each lecture will be provided by the instructor.
WeekTopicsSubtopics
Introduction to the Quantitative Risk Management course:
  • History of Risk Management and its vital importance in the current economic environment
  • Creating a Risk Management culture in the financial organization and beyond
Major types of Financial Risk and cross-fertilization of their infrastructures and consequences for:
  • Risk Management practices
  • Risk Analytics and Infrastructure.
Market Risk and its:
  • Risk Management practices
  • Risk Analytics and Infrastructure.
Credit Risk and its:
  • Risk Management practices
  • Risk Analytics and Infrastructure.
Liquidity Risk and its:
  • Risk Management practices
  • Risk Analytics and Infrastructure.
Operational Risk and its:
  • Risk Management practices
  • Risk Analytics and Infrastructure.
Enterprise Stress Testing (EST) and
  • Its role during financial crises and afterwards
  • Its approaches and their pros and cons
Backtesting and its crucial importance in tackling financial crisis indicators in:
  • Risk factor backtesting
  • Portfolio backtesting
Quantitative approaches in all major types of Risk Management with the goal of a single toolkit for all Risk Management:
  • Valuation models
  • Scenario generation models
10  Quantitative approaches in all major types of Risk Management with the goal of a single toolkit for all Risk Management (cont.):
  • Risk parameters calibration
  • Portfolio risk calculation
11  Data in Risk Management and vital importance for creating a successful Risk Management Infrastructure of:
  • Trade Data
  • Risk-specific Data
12  Basel frameworks (1, 2, 2.5 and 3)
  • How to develop a Basel-compliant Risk Infrastructure.
13  Risk Reporting Risk Reporting importance for:
  • Risk Management
  • Risk Technology
  • Risk Quants
  • Management and regulators
14  Conclusion:
Perspectives of future development in all major areas of Risk Management and Risk Analytics
  • Regulatory challenges and how the latest innovations in Risk
  • Management and Risk Analytics help to become regulatory compliant

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HillCenter

Mathematical Finance Master's Program

Department of Mathematics, Hill 348
Hill Center for Mathematical Sciences
Rutgers, The State University of New Jersey
110 Frelinghuysen Road
Piscataway, NJ 08854-8019

Email: finmath (at) rci.rutgers.edu
Phone: +1.848.445.3920
Fax: +1.732.445.5530