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FIN343 Market Risk Management

This subject focuses on the management of market risk. It examines the concept of market risk management and details an institutional framework for understanding how risk arises and how it is managed. The subject examines the lessons from some of the most prominent financial disasters of the past thirty years, including the Global Financial Crisis (GFC). The subject considers an integrated framework for market risk management and examines value-at-risk (VaR), stress testing and control of model risk. The subject examines the common types of market risk and the instruments used to manage it: spot risk; forward risk; vanilla options risk; and exotic options risk. The subject focuses on the identification, measurement and mitigation of market risk.

This subject contributes to the risk management major.

For more information, please refer to the subject outline.

  • Learning outcomes
    • At the completion of this subject students should be able to:

      1. Explain the concept and types of market risk.
      2. Understand the lessons from major financial disasters (including the GFC).
      3. Evaluate how market risk is identified, measured and mitigated.
      4. Appraise Value at Risk and how it is used in the measurement of market risk in a range of different scenarios.
      5. Understand the process of stress testing and associated model risk. Evaluate key market risks in a range of different scenarios.
  • Subject content
    • For SP1 2017 the subject content is changing to the following:

      Topic Title
      Topic 1 Introduction to market risk
      Topic 2 Financial disasters
      Topic 3 Managing market risk
      Topic 4 VaR and stress testing
      Topic 5 Model risk
      Topic 6 Managing spot risk
      Topic 7 Managing forward risk
      Topic 8 Managing vanilla options risk
      Topic 9 Managing exotic options risk

  • Assessment
  • Prerequisites
  • Reading list
    • Prescribed Text

      • Allen, S 2013, Financial risk management: a practitioner’s guide to managing market and credit risk, John Wiley & Sons. ISBN 9781118175453

      Retailers of educational books include Co-op Bookshop and Boffins Bookshop. Texts can also be borrowed from the Kaplan library or other libraries. Details of required and further reading are provided in the subject room.  Purchase of any text other than a prescribed text is not required.