Course Name

Code

Semester

Theory
(hour/week)

Application
(hour/week)

Laboratory
(hour/week)

Local Credits

ECTS

Quantitative Methods in Risk Management

RM 403

7

3

0

0

3

6

 

 

Prerequisites

:

None

 

Course Language

:

English

Course Type

:

Elective

Course Level

:

Undergraduate

Mode of Delivery

:

Face to face

Course Coordinator

:

Assoc. Prof. Dr C. Coşkun Küçüközmen

Course Lecturer(s)

:

Gökhan M. Ürkmez, MBA & MS in S.E.

Course Assistants

:

Course Objectives

:

Dersin temel amacı öğrencilerin riskleri tanımlamalarına, risk ölçümü yapılabilmesi için çeşitli yaklaşımları belirlemelerine, ve bunların kurumsal strateji üzerindeki etkilerini incelemelerine, hedge yapılıp yapılmaması konusunda karar verebilmelerine, hedge yapılmasının uygun görüldüğü anlarda hedge hedeflerine ulaşılabilmesi için alternatif stratejiler belirmelerine olanak sağlayan temel araçlar ve fikirler üzerine odaklanmaktır.

 

Primary objective of the course will include the selection and application of the essential tools and ideas that will aid the students in identifying risks, determining various approaches to quantifying them and evaluating the effects on corporate strategy, as well as, helping the students to make hedge or don’t hedge decisions. The course will also equip the students with the necessary skills to identify the alternative strategies in order to accomplish the proper hedging objectives.

Course Content

:

Bu derste veri ve portföy analizi muhtelif yöntemler kullanılarak gerçekleştirilecektir. Öğrenme teknikleri genellikle Excel tabanlı olup JP Morgan tarafından geliştirilen RiskMetricsTM yazılımı, risk analiz ve modellemesinde ölçüt olarak alınacaktır.

 

Data and portfolio risk analysis will be studied by using several approaches. Learning those techniques will require an extensive use of Excel-based applications. JP Morgan’s RiskMetricsTM will also be covered during the course as a benchmark tool for risk analysis and modeling.

Recommended Optional Program Components

:

None

 

 

 

 

Week

Subjects

Related Preparation

1

Introduction to Risk Management and Quantitative Analysis

Risk and Its Treatment, A Brief History of Risk, Uncertainty versus Risk, Fundamentals and Scope of Risk Management, Loss Forecasting, Financial Analysis in Risk Management Decision Making, Integrated Risk Management Framework and Various Risk Management Tools… 

2

Financial Time Series and Their Characteristics

Time Series Forecasting and Methodology, Asset Returns, Distributional Properties of Returns, Multivariate Returns…

3

Linear Time Series Analysis and Its Applications

Stationarity, Correlation and Auto-Correlation, Simple Autoregressive Models, Simple Moving Average Models, Seasonal Models, Regression Models with Time Series Errors…

4

Nonlinear Models and Their Applications

Non-Linear Modeling and Non-Linearity Tests, Forecasting…

5

High Frequency Data Analysis – Continuous Time Models and Their Applications

Duration Models, Non-Linear Duration Models, Bivariate Models…

6

Markov Chain Monte Carlo Methods with Applications – Stochastic Methods and Modeling

Markov Chain Simulation, Bayesian Inference, Stochastic Differentiation, Black-Scholes Pricing model, Stochastic Volatility Models, Forecasting…

7

LAB – Financial Analysis and Modeling Using Excel

Sengupta – Chapters. 10 & 14

Using the Financial Functions & Building Good Excel Models and Debugging Them…

8

Quantification of Risk

What is Monte Carlo Simulation?, Why are Simulations Important?, Comparing Simulation with Traditional Analyses, Using Risk Simulator and Excel to Perform Simulations…

9

Mid-Term

Weeks: 1 thru 8

10

Risk Diversification, Mitigation and Management

The Search for the Optimal Decision, Optimization under Uncertainty, Tornado Sensitivity, Scenario and Convergence Analysis, The Warning Signs, Changing Corporate Culture, Making Tomorrow’s Forecast Today…

11

How Traders Manage Their Risk

Hull - Chapter. 9

12

LAB – Financial Analysis and Modeling Using Excel

Sengupta – Chapters. 16, 18 & 19

Analyzing Market History, Simulating Stock Prices, The Black-Scholes-Merton Equation for Option Valuation, Binomial Option Pricing…

13

Regulation, Basel II and Solvency II –

Scenario Analysis & Stress Testing

Hull - Chapters. 11 & 17

14

Operational, Liquidity & Model Risk

Hull - Chapters. 18 - 20

15

Risk Management Mistakes to Avoid &

Review for Final Exam (Comprehensive)

Chapter. 22

 

 

 

 

Course Notes / Textbooks

:

Yukarıda belirtilen kitap bölümleri / Book Chapters

Other Sources

:

TEXTBOOK:

 

·         Risk Management and Financial Institutions, John C. Hull, ISBN: 978-0-13-800617-4  - REQUIRED

·         Applied Risk Analysis, Jonathan Mun, ISBN: 978-0-47-147885-0  - OPTIONAL

·         Modeling Risk, Jonathan Mun, ISBN: 978-0-470-59221-2  - OPTIONAL

·         Financial Analysis and Modeling Using Excel and VBA, Chandan Sengupta, ISBN: 978-0-470-27560-3   - OPTIONAL

·         Principles of Risk Management and Insurance, George E. Rejda, ISBN: 978-0-13-702913-6   - OPTIONAL

 

Journals & Magazines

Risk Magazine (http://www.risk.net/ , paid subscription required, abstracts available for free)

Global Risk Regulator (http://www.globalriskregulator.com , paid subscription required, abstracts and some articles are available for free)

The Journal of Risk (http://www.thejournalofrisk.com/)

Daily Journals

Financial Times

Wall Street Journal

Web-Sites (sign up required)

GARP  (http://www.garp.org/)

PRMIA (http://www.prmia.org/)

Riskmetrics (http://www.riskmetrics.com/)

Bank for International Settlements (http://www.bis.org)

Risk Management Web-Sites

http://www.riskworld.com/websites/webfiles/ws5aa015.htm 

 

Semester Requirements

Number

Percentage of Grade

Attendance

10

Laboratory

2

20

Application

Field Work

Special Course Internship (Work Placement)

Quizzes

Homework Assignments

Presentation

1

10

Project

Seminar

Midterms

1

25

Final

1

35

Total

100

PERCENTAGE OF SEMESTER WORK

65

PERCENTAGE OF FINAL WORK

35

TOTAL

100

 

Course Category

(Only one category will be chosen)

Core Courses

Major Area Courses

X

Supportive Courses

Media and Management Skills Courses

Transferable Skill Courses

 

Program Qualifications / Outcomes

* Level of Contribution

1

2

3

4

5

1

To become individuals having high intellectual capacity, improved social skills, positive thinking, the ability to adapt to different environments and institutions

X

2

To have technical equipment, flexible thinking and action ability and multiple language skills to be capable of working in international platforms

X

3

To be able to utilize the basic knowledge they obtained with an interdisciplinary approach to business, economics, etc. in creating expertise in the fields of International Trade and Finance in accordance with the requirements of the globalized business world

X

4

To be able to monitor and analyze the dynamics of international trade and financial markets which are the two fields observed intensively in the current conjuncture of globalization

X

5

To develop suggested solutions and recommendations by informing the people and institutions predicting regional, national and international problems in the fields of international trade and finance with a proactive approach

X

6

To possess the ability of analytical thinking and the ability to synthesize with quantitative proficiency as required in the program

X

7

To have the characteristics to inquire and investigate the knowledge and skills acquired during the education process in relation to the requirements of existing market conditions

X

8

To identify and analyze the validity of theories related to the international trade and finance and their relationships regarding current conditions

X

9

To possess the knowledge of a second foreign language to the extent of their individual abilities, besides the competency in the English language to be able to communicate effectively

X

10

To have the qualifications of managing and being managed to solve existing and potential problems encountered in practice

X

11

To be able to organize activities that will contribute to the personal and professional development of the employees in the department where he/she holds an executive position

X

*1 Lowest, 2 Low, 3 Average, 4 High, 5 Highest

Activities

Number

Duration (Hours)

Total Workload

Course Hours (Including Exam Week: 16 x Total Hours)

16

3

48

Laboratory

 

 

 

Application

 

 

 

Special Course Internship (Work Placement)

 

 

 

Field Work

 

 

 

Study Hours Out of Class

16

1

16

Presentations / Seminar

1

6

6

Project

1

10

10

Homework Assignments

 

 

 

Quizzes

10

1

10

Midterms

 

 

10

Final

 

 

14

 

 

Total Workload

114