RPRD 801: Risk Management Theory and Applications

This course is an introduction to Risk Management theory and practice in financial institutions. The first part of the course introduces basic modeling strategies and practices, exploring their strengths and weaknesses. The second part of the course explores new attempts to deal with weaknesses revealed by the Crisis.

A. Conventional Risk Management Theory and Applications within the Financial Institution

  • Introduction to Risk Management
  • Market Risk Models
  • Credit Risk Models and Practices
  • Credit Derivative models
  • Model Risk and Back-Testing
  • Stress Tests
  • Introduction to Market Micro-Structure and Liquidity Risk Models

B. Risk Management Lessons Being Learned from the Crisis

  • Modifying the models
  • Changes to RM Thinking and Practice

Textbooks
Crouhy, Galai and Mark, Risk Management, McGraw-Hill 2001. (Crouhy (2001))
Dowd, Measuring Market Risk, Second Edition, Wiley, 2005.

Basic References
Saunders and Allen, Credit Risk Management In and Out of the Financial Crisis,Third Edition, Wiley Edition, 2010.
Beneplane and Rochet, Risk Management in Turbulent Times, OUP, 2011.
Jarrow and Turnbull, Derivative Securities, Second Edition, 2000.
Meissner, Credit Derivatives: Applications, Pricing and Risk Management, Blackwell, 2005.
Constantinides, Harris and Stulz (eds) Handbook of the Economics of Finance, Vols 2A and 2B, North-Holland (2013).
Shin, Risk and Liquidity, (2011) OUP.

Reading list 2016

RPRD 801 Reading List September 20 2016

Exercises 2016

RPRD 801 Exercise 1 2016

RPRD 801 Exercise 2 2016

RPRD 801 Exercise-Sheet 3 2016

Wk 1 Sep 12-16

Wk 2 Sep 19-23

Wk 3 Sep 26 – 30

Beneplane and Rochet Risk-Mgmt-in-Turbulent-Times-Ch-5-1

Dowd Math Gone Mad 2014

Wk 4 Oct 3-7

Jarrow Turnbull Derivatives 2000 Ch. 15 Interest Rate Derivatives

Jarrow & Turnball Ch 13

Duffee Forecasting Interest Rates 2012t

Wk 5 Oct 10-14

John Crean lectures 67

John Crean Notes to Lecture 3 – a) Risk Evaluation Checklist

John Crean Risk Eval. Checklist

Wk 6 Oct 17-21

SP 2015 Annual Global Corporate Default Study And Rating Transitions

Wk 7 Oct 24-28

Milne Distance-to-Default-and-the-Fin-Crisis-2013

Saunders and Allen (2010) ch 4

Saunders and Allen (2010) ch 5

Jarrow and Tunrbull Derivative Securities Ch. 18 Credit Risk

Wk 8 Nov 1-4

Altman Default Recovery2011

Saunders and Allen (2010) ch 7

Saunders and Allen (2010) ch 8

Gregory Counterparty Risk 2015 Ch 4

Gregory Counterparty Risk 2015 Ch 5

Gregory Counterparty Risk 2015 Ch 9

Jarrow and Tunrbull Derivative Securities Ch. 18 Credit Risk

Week 9 Nov 7-11

Curti et al Operational Risks Fed 2016

Week 10 Nov 14-18

Beneplane and Rochet Risk Mgmt in Turbulent Times ch 7

Beneplane and Rochet Risk Mgmt in Turbulent Times ch 8

Frank Milne Bank of Canada Review 2009

Saunders and Allen (2010) ch 10

CGM (2014) Ch 16

Week 11 Nov 21-25

Anand Bedard-Page Traclet Stress Test System Wide BofC 2014

Anderson Stress_testing_eBook 2016

Dowd No Stress II Adam Smith Ins. 2015

Dowd-Reg-Risk-Modelling-by-the-Fed1

Kartik Anand MFRAF presentation 2013

IMF stress test tech report 2014 cr1469

Borio Drehmann Tsatsaronis Stress testing 2012

Foucalt Pagano and Roell Market Liquidity Evidence and Policy Ch 1

Wk 12 Nov 28-Dec 2

Amihud Mendelson Pedersen Liquidity and Asset Pricing 2005

Pedersen When Everyone Runs for the Exits 2009

Duarte Eisenbach Firesale Spillovers and Sys Risk 2014

Kapadia Drehman et al Liquidity Risk 2012