Module Catalogues, Xi'an Jiaotong-Liverpool University   
Module Code: MTH305
Module Title: Risk Management
Module Level: Level 3
Module Credits: 5.00
Academic Year: 2019/20
Semester: SEM1
Originating Department: Mathematical Sciences
Pre-requisites: N/A
To provide an introduction to statistical methods for managing the risk in financial activities and the associated stochastic models for financial data.
Learning outcomes 

A. apply statistics to the financial sectors of the economy studied.

B. calculate asset return and analyze statistical aspect of asset return.

C. compose investment portfolios of risky assets, both theoretically and numerically, to obtain a desired return with minimum risk, and subject to optimality of return and risk utility functions.

D. model loss and severity distributions to real data in operational risk, .

E. conduct the theoretical risk analysis for the short-term insurance products in insurance finance.

F. use mathematical software (MATLAB) to conduct risk analysis of portfolio of risky assets.

Method of teaching and learning 
This module will be delivered by a combination of formal lectures, tutorials and computer labs.
Risky assets and return:

Return and volatility of risky assets; statistical aspects of return; MATLAB functions in finance.

Portfolio composition analysis:

General idea of portfolio analysis; mean and variance aspects of portfolio theory; diversification and portfolio implications; return and risk for two-asset portfolios; the return-risk relation for two maximally correlated assets; the return-risk relation for two minimally correlated assets; the return-risk relation for two uncorrelated assets; the return-risk relation for two generally correlated assets; portfolios with short selling; portfolios with risk-free investments or cash-in-hand and with borrowing. MATLAB programs for two-asset portfolio analysis.

Portfolios with multiple assets:

The efficient frontier and its portfolios; efficient frontier portfolio of multiple risky assets; optimum efficient frontier portfolios; the maximum return to risk ratio portfolio; optimally adjusted return portfolios; multiple asset portfolios including a risk-free asset; the tangent portfolio with a risk-free return; optimal portfolios including a risk-free asset; the market model for returns; the market model with a risk-free asset; the capital asset pricing model; the efficient frontier for differing investing and borrowing rates. MATLAB programs for portfolios with multiple assets.

Operational risk and short-term insurance

Concept of aggregate operational loss; Compound process; Review of loss frequency distributions (Poisson, Exponential, and Pareto distributions); Poisson process to real data; Severity distributions ; Operational risk analysis of short-term insurance (number and size of claims); insurance premiums and security loadings; Ruin probability; modifications to loss distributions for excess and reinsurance.

Delivery Hours  
Lectures Seminars Tutorials Lab/Prcaticals Fieldwork / Placement Other(Private study) Total
Hours/Semester 26    13  8    103  150 


Sequence Method % of Final Mark
1 Coursework 15.00
2 Projects - Portfolio Risk Analysis Using Matlab 15.00
3 Final Exam 70.00

Module Catalogue generated from SITS CUT-OFF: 12/16/2019 7:52:52 AM