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Financial Risk Modeling

Instructor(s):

Dates:

May 16, 2014 to June 13, 2014

Thank you for your submission.

Financial Risk Modeling

taught by Huybert Groenendaal
and Greg Nolder

Aim of Course:

This course will cover the most important principles, techniques and tools in Financial Quantitative Risk Analysis. The course has been developed to effectively combine theoretical sessions with classroom examples and exercises in order to provide students with a comprehensive analysis of Monte Carlo techniques. In addition to discussions of recent innovations in the application of Monte Carlo methods, the course will cover many practical examples, case studies and interactive sessions.

The course will also get the participants comfortable with risk analysis modeling environments (in this case ModelRisk with the Insurance and Finance Module within Excel, but the lessons and techniques apply equally well to other modeling environments). Finally, the course will also cover common mistakes and how to avoid them.

This course may be taken individually (one-off) or as part of a certificate program.

Course Program:

WEEK 1: Introduction

  • Introduction to quantitative risk analysis and Monte Carlo
    • Core ideas of risk analysis
    • What is a probability distribution
    • How scenarios are generated, outputs produced and analyzed, why it works
  • Distributions
    • Most common univariate distributions in finance
    • Introduction to statistical descriptors-mean,mode,standard deviation,skewness,kurtosis
    • Example financial model and exercise


WEEK 2:
Stochastic Time Series

  • Trend, volatility, seasonality, autocorrelaton, cyclicity, mean reversion
  • GBM, +mean reversion, jump diffusioin, both, seasonality
  • Autoregressive models: ARCH, GARCH, EGARCH, APARCH
  • Markov chains
  • Multi-variate time series
  • Discussion of attributes and application of different stochastic time series
  • Example model and exercise


WEEK 3:
How to Deal with Correlations

  • Rank order
  • Covariance measures
  • Copulas
  • Example model and exercise

WEEK 4: Model Fitting and Conclusion

  • Fitting distributions, time series and copulas to historical data
    • Distributions (MLE)
    • Time series (MLE)
    • Copulas (MLE)
    • Fit comparisons with information criteria (i.e. AIC, SIC, HQIC)
    • Example model and exercise
  • Emphasis on examples model and practical case
    • VAR, expected shortfall examples
    • Some time series examples (including fitting to past financial datasets)
    • Analyzing correlations between stochastic variables, fitting copulas and applying then in a simulation model
    • Basel II example with operational risk
    • Markov Chain model example (for modeling credit portfolios)

HOMEWORK:

Homework in this course consists of short answer questions to test concepts, guided data analysis problems using software, and guided data modeling problems using software.

In addition to assigned readings, this course also has supplemental readings available online, and an end of course data modeling project.

Financial Risk Modeling

Be sure you meet all of the minimum requirements before you register, click here to learn more.

Instructor(s):

Dates:
May 16, 2014 to June 13, 2014

Course Fee: $629

Tuition Savings:  When you register online for 3 or more courses, $200 is automatically deducted from the total tuition. (This offer cannot be combined and is only applicable to courses of 3 weeks or longer.)


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Add $50 service fee if you require a prior invoice, or if you need to submit a purchase order or voucher, pay by wire transfer or EFT, or refund and reprocess a prior payment. Please use this printed registration form, for these and other special orders.

Courses may fill up at any time and registrations are processed in the order in which they are received. Your registration will be confirmed for the first available course date, unless you specify otherwise.

Financial Risk Modeling

taught by Huybert Groenendaal
and Greg Nolder

Who Should Take This Course:

Anyone in investment banking, asset/investment/fund mangement, merchant banking, insurance companies, software/technology, government/public body and academia with an interest in applying quantitative probablilistic techniques in the fields of finance and insurance.

Level:

intermediate/advanced

Prerequisite:
These are listed for your benefit so you can determine for yourself, whether you have the needed background, whether from taking the listed courses, or by other experience.

Introduction to Quantitative Risk Analysis or

Risk Simulation and Queueing

All models are developed using Excel and ModelRisk. It is therefore essential that all participants be proficient in Excel, including the use of Excel functions.

Organization of the Course:

This course takes place online at the Institute for 4 weeks. During each course week, you participate at times of your own choosing - there are no set times when you must be online. Course participants will be given access to a private discussion board. In class discussions led by the instructor, you can post questions, seek clarification, and interact with your fellow students and the instructor.

The course typically requires 15 hours per week. At the beginning of each week, you receive the relevant material, in addition to answers to exercises from the previous session. During the week, you are expected to go over the course materials, work through exercises, and submit answers. Discussion among participants is encouraged. The instructor will provide answers and comments, and at the end of the week, you will receive individual feedback on your homework answers.


Credit:
Students come to the Institute for a variety of reasons. As you begin the course, you will be asked to specify your category:
  1. You may be interested only in learning the material presented, and not be concerned with grades or a record of completion.
  2. You may be enrolled in PASS (Programs in Analytics and Statistical Studies) that requires demonstration of proficiency in the subject, in which case your work will be assessed for a grade.
  3. You may require a "Record of Course Completion," along with professional development credit in the form of Continuing Education Units (CEU's).  For those successfully completing the course, 5.0 CEU's and a record of course completion will be issued by The Institute, upon request.

Course Text:

Course participants will be provided with weekly digital reading material, as well as the required course text once enrolled in the course. Though completely optional and not required, the following texts are recommended as additional resources  that will give more in-depth understanding of the model as well as instruction for building good and practical models.

Practical Spreadsheet Risk Modeling for Management by Lehman, Groenendaal and Nolder, from CRC Press. This textbook is intended for those new to risk analysis. It features case studies and real world examples and is bundled with a 120 day license for ModelRisk.  It can be ordered directly from the publisher; use promo code 194CM for a 20% discount.

Risk Analysis: A Quantitiative Guide, 3rd Edition by David Vose, from Wiley. This new edition includes more than 150 example models in Excel and 400 illustrations as well as a 90 day license of ModelRisk. Wiley typically offers statistics.com customers up to 15% discount on this book (and all other statistics titles): enter the code aff15 in the Promotion Code field when prompted during checkout and click the Apply Discount button. (If you are located in Asia, the web procedure for your location may not accept this discount -- try calling your regional Wiley representative.)

Software:

Course illustrations and homework assignments will use ModelRisk, the Monte Carlo simulation and financial risk analysis tool from Vose Software. A limited time free trial license of will be provided to all course participants at the start of the course.


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