Alexander McNeil

Statistical Methods for Financial Risk Management

Time and Place

Tuesday 1500-1700, winter semester 2001-2002. Lecture Theatre HG D7.1

Description

Quantitative methodology is an increasingly important component of risk management in financial institutions. Financial risk management presents an extremely interesting area of application for statistics with many new challenges. Whereas much of traditional statistics concerns the average, the normal and the expected, risk management has more to do with the extreme, the abnormal and the unexpected. Central technical issues will be modelling the volatility of financial instruments, modelling extreme values and modelling dependent risks. We will examine methods relevant for both market and credit risk management.

Target Audience

Students of mathematics and statistics who are interested in learning about practical applications in the area of risk management;
Practitioners of financial risk management who wish to improve their knowledge of relevant statistical methodology.

Requirements

The course will assume prior knowledge of probability and basic statistical techniques.
The course will be taught in English.

Basic concepts of risk management
Standard statistical methods for market risks
Multivariate risk models and copulas
Modelling financial time series

Recommended Literature

Jorion, P. 2001. Value at Risk: the New Benchmark for Measuring Financial Risk. McGraw-Hill, New York. Introductory reading and relevant for Chapters 1 & 2.
Crouhy, M, Galai, D & Mark, R. 2001. Risk Management. McGraw-Hill, New York. Introductory reading and relevant for Chapters 1 & 2.
Embrechts, P, Frey, R & McNeil, A. Basic Concepts in Risk Management, chapter of a forthcoming book, which may be downloaded by members of ETH Maths Department. Essential for Chapter 1.
Embrechts, P, Frey, R & McNeil, A. Multivariate Models: Theory, chapter of a forthcoming book, which may be downloaded by members of ETH Maths Department. Essential for Chapter 3.
Franke, J, Härdle, W & Hafner, C. 2001. Einführung in die Statistik der Finanzmärkte. Springer Verlag, Heidelberg. An electronic version of this book is available. Useful for Chapter 4.