ICM207-Market Risk

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Spring term module
Pre-requisites: ICM103 Quantitative Methods for Finance
Non-modular pre-requisites:
Modules excluded:
Module version for: 2016/7

Module Convenor: Dr Emese Lazar

Email: e.lazar@icmacentre.ac.uk

Summary module description:

This module provides an understanding of the Value-at-Risk (VaR) framework for market risk assessment and control. The module has a significant practical component with computer-based workshops that are designed to support the lecture material.

Assessable learning outcomes:
By the end of the module, it is expected that students will:
Understand the latest developments in banking regulations that are the main driving force behind changes in our approaches to risk measurement
Outline the foundations of market risk analysis and the basic models for assessing market risk
Describe the market risk measurement techniques that are used daily in the front and middle offices of banks; particular emphasis is placed on the appraisal of the covariance matrices that are used to measure the market risk of portfolios
Be able to build various Value-at-Risk (VaR) models for market risk for international portfolios of equities, FX, interest rate products, commodities, derivatives etc.

Additional outcomes:
This course is aimed at the synthesis of the mathematics, statistics and banking that they have learned in Part 1 of their MSc. Students will find that the Market Risk course will fuse together their knowledge of finance that is gained in Securities, Futures and Options, with their knowledge of econometrics that is gained in Quantitative Methods for Finance.

Outline content:
The characteristics of markets and market risk
Capital requirements & RAPM
Value at Risk models
Advanced VaR models
Applications to Equities
Applications to Foreign exchange
Applications to Interest rate products
Applications to Derivatives
Applications to Fund management, banking & non-financial firms

Brief description of teaching and learning methods:
Each topic is introduced in a lecture + practical workshop format. During the practical workshops students will be expected to use specially designed Excel spreadsheets.

Contact hours:
  Spring Summer DL
Lectures 18   18
Practicals 10   10
Other contact (eg study visits)      
Total hours 28   28
Number of essays or assignments 2 multiple choice tests       5 assignments    2 multiple choice tests
Other (eg major seminar paper)      

Summative Assessment Methods:
Method Percentage
Written exam 60
Written assignment including essay 10
Class test administered by School 30

Other information on summative assessment:

Formative assessment methods:

Penalties for late submission:
Penalties for late submission on this module are in accordance with the University policy. Please refer to page 5 of the Postgraduate Guide to Assessment for further information: http://www.reading.ac.uk/internal/exams/student/exa-guidePG.aspx

Length of examination:
2 hours closed book written examination

Requirements for a pass:
50% weighted average mark

Reassessment arrangements:
By written examination only, as part of the overall examination arrangements for the MSc programme.

Additional Costs (specified where applicable):
1) Required text books: Carol Alexander: Market Risk Analysis, volume IV: Value-at-Risk Models John Wiley &Sons, 2009, ISBN-10: 0470997885, £62.99.
2) Specialist equipment or materials:
3) Specialist clothing, footwear or headgear:
4) Printing and binding:
5) Computers and devices with a particular specification:
6) Travel, accommodation and subsistence:

Last updated: 21 December 2016

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