The course is prepared for students with basic prerequisites of probability and statistics, and of financial and insurance markets.
The objective of the course is to describe the main risks which can have an impact on the banking and insurance activity, and to provide to the students the main mathematical and statistical methodologis for risk evaluation and control. The course will also introduce the guidelines of the regulatory framework for risk control.
1. Interest rate risk
a. The repricing gap model
b. Duration and convexity
c. Cash-flow mapping
d. Liquidity risk
2. Market risk
a. Parametric VaR
b. Methods for volatility estimation
c. Non-parametric VaR. Simulation methods: Monte Carlo and historical simulations
d. Stress testing and back-testing
e. Expected shortfall
3. Credit risk
a. Credit scoring, logit and probit regressions
b. Merton's model
c. Revovery rate
4. Operational risk
a. Measuring extreme risks
b. The generalized Pareto distribution
c. Catastrophal risks. Elements of Extreme Value Theory
5. Regulation in banks and insurance
a. Capital requirements
b. The Basel agreements
c. Solvency II
Resti e Sironi, Rischio e valore nelle banche, Egea Ed.
(English edition: Resti and Sironi, Risk management and shareholders's value in banking, Wiley)
Christoffersen, Elements of financial risk management, Elsevier Ed.
Embrechts, Kluppelberg, Mikosh, Modelling Extremal Events for Insurance and Finance, Springer Ed.
Written Exam (50%) + Project Work (50%).
The Project Work, to be decided with the Teacher, is a small paper, with length less than 10 pages, which illustratates the valuation of the risk of an actual financial or insurance portfolio. The Project Work needs to be completed to gain access to the written exam.
via Cantarane, 24
VAT number 01541040232
Italian Fiscal Code 93009870234
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