Quantitative Finance & Risk Management - Module 2

In module two, you will learn about the classical portfolio theory of Markowitz, the capital asset pricing model and recent developments of these theories. We will investigate quantitative risk and return, looking at econometric models such as the ARCH framework and risk management metrics such as VaR and how they are used in the industry.

Portfolio Management

Measuring risk and return
Benefits of diversification
Modern Portfolio Theory and the Capital Asset Pricing Model
The efficient frontier
Optimizing your portfolio
How to analyze portfolio performance
Alphas and Betas

Fundamentals of Optimization and Application to Portfolio Selection

Fundamentals of portfolio optimization
Formulation of optimization problems
Solving unconstrained problems using calculus
Kuhn-Tucker conditions
Derivation of CAPM

Value at Risk and Expected Shortfall

Measuring Risk
VaR and Stressed VaR
Expected Shortfall and Liquidity Horizons
Correlation Everywhere
Frontiers: Extreme Value Theory

Asset Returns: Key, Empirical Stylised Facts

Volatility clustering: the concept and the evidence
Properties of daily asset returns
Properties of high-frequency returns

Volatility Models: The ARCH Framework

Why ARCH models are popular?
The original GARCH model
What makes a model an ARCH model?
Asymmetric ARCH models
Econometric methods

Risk Regulation and Basel III/IV

Definition of capital
Evolution of Basel
Basel III/IV and market risk
Key provisions

Collateral and Margins

Expected Exposure (EE) profiles for various types of instruments
Types of Collateral
Calculation Initial and Variation Margins
Minimum transfer amount (MTA)
ISDA / CSA documentation

Lecture order and content may occasionally change due to circumstances beyond our control. However, this will never affect the quality of the program.