News and Events

MSc Financial Engineering

Date: 16 February, 2012  Page Author: André Mansi

The ICMA Centre’s financial engineering degree is highly respected by quantitative analysts and their employers. The credit crunch and subsequent events have emphasised the need to develop better pricing and better hedging models for all complex products. The practical and quantitative skills that you will develop on the ICMA Centre’s Financial Engineering MSc will equip you to meet this challenge.

Our compulsory modules provide a firm grounding in probability theory, stochastic calculus, derivatives pricing, quantitative and numerical methods, structuring products, volatility analysis, and the modelling of credit, equity, foreign exchange and interest rate derivatives. We also provide a thorough training in C++ and other programming tools. Optional modules will allow you to focus on risk analysis, portfolio management, designing trading strategies or econometric analysis.

This newly structured degree aims to further enhance the strong reputation of its precursor – the MSc in Financial Engineering and Quantitative Analysis, that was established in 1999.

A good background in mathematics is required or acceptance to this programme – see entry requirements below.

Entry Requirements

Entry requirements

Undergraduate Degree
 Minimum 2:1 or the equivalent from an overseas institution*.
Degree Discipline
 Quantitative discipline – must have a very good existing level of numeracy. Mathematical and engineering degrees are preferred.
GMAT
 We may ask you to submit a GMAT score if we think it appropriate in your individual case. For example, if you have been out of education for more than a few years or have little evidence of any numerical ability.For information on the GMAT and the location of test centres worldwide, please visitwww.mba.com

* Please note that due to increasing competition for places on our Masters programmes our entry requirements may change.

We operate a rolling admissions system and you are therefore advised to apply early in order to be sure of your place on our programmes. We are experiencing high levels of demand for 2012 entry, and it is possible we will have to close applications to some programmes once places are filled.

English requirements

Proficiency required for International students enrolling in this degree for entry in September 2012 are:

TOEFL (Test of English as a foreign language): Overall score of 88 for the internet based test, with no less than 22 in Reading, 21 in Listening, 23 in Speaking and 21 in Writing.

IELTS (British Council International English Language Test): Score of 6.5 overall with no component in the test less than 6.0.

 

Proficiency required for international students enrolling in this degree for entry in September 2013 will be:

TOEFL (Test of English as a foreign language): Overall score of 100 for the internet based test, with no less than 22 in Reading, 21 in Listening, 23 in Speaking and 21 in Writing.

IELTS (British Council International English Language Test): Score of 7.0 overall with no component in the test less than 6.5.

 

Contact

For more details, contact Kim Mountford, Admissions Officer, at k.mountford@icmacentre.ac.uk

Fees

Fees 2012-13

Full-time
MSc Financial Engineering £18,000

Fees are the same for both EU and overseas students.

Living expenses are in addition to the above fees. Overseas full-time participants can expect to spend approximately £9,400 on additional living expenses during the course of their studies. Home/EU full-time participants can expect to spend approximately £8,000 on additional living expenses during the course of their studies. Flexible participants can expect to spend approximately £5,000 during their part 2 studies.

How to apply

Full-Time MSc Applications

Applications closed for 2011 entry:

Applications for 2012 entry are open for all programmes.

The ICMA Centre operates on a rolling admissions basis, meaning that prospective students can apply for our programmes throughout the year, however we do advise to apply early in the year. We aim to return a decision within 4-6 weeks of receiving your application.

Full-time applicants can apply online or download our application form and complete it by hand.

Flexible and Distance Learning Applications

We accept online applications only for flexible and distance learning.

Applications closed for all flexible and distance learning programmes for 2011 entry. Applications are open for 2012 entry.

Learning options

Learning Options

Full-time: 9 months

FAQs

Do I need to take GMAT?

If you are unsure as to the need to take GMAT (Graduate Management Admissions Test), please apply without taking it. We will advise in the form of a conditional offer if we think that it is necessary for you to take it. Obtaining a good score of 600 or above and a good score in the quantitative section of the test can support your case at the Admissions Committee. The GMAT is not a mandatory requirement for applications to the MSc programme, but can enhance an application. More information about the GMAT can be obtained at www.mba.com.

When is the deadline for applications?

There is no fixed deadline for full-time applications. However, you are advised to apply early, as the admission process can take up to 4-6 weeks to complete. Places become very limited from June onwards. You are encouraged to telephone the Centre after that date to clarify the situation.

Deadline for Flexible and Distance Learning applications: Friday 10 August 2012.

How long will it take to receive an answer to my application?

The admissions process will take up to 4-6 weeks from receipt of a completed application. We will endeavour to process your application sooner, however, the delay is normally due to outstanding supporting documents.

My referee has sent his reference direct, is this OK?

Yes. We keep all references and match them with applications when they are received.

Who decides on the suitability of an application?

Each application is considered by the Admissions Committee, made up of academic members of staff and the Admissions Officer.

How do I pay the £1000 deposit and when is the deadline?

By Sterling cheque payable to the University of Reading by credit card or bank transfer.

Applicants accepted on to an ICMA Centre MSc programme should pay their deposit by the deadline indicated in the  recommendation e-mail from the ICMA Centre.

Where do I send my information proving that I have fulfilled my conditions?

Send this information to the Postgraduate Admission Office, the ICMA Centre will be automatically updated. Their full address is:

Postgraduate Admissions Office
Henley Business School
University of Reading
Whiteknights
PO Box 218
Reading
RG6 6AA

Am I qualified to do this programme?

We can only give a considered answer to this question if we have received a completed application form and supporting documents. Without this information it is difficult to make any evaluation of your previous qualifications.

To whom should I address any queries about my application?

All queries should be addressed to the Admissions Team: admissions@icmacentre.ac.uk.

Does the ICMA Centre provide funding? If not, how do I fund the programme?

A range of scholarship awards are available. Please refer to the ICMA Centre Scholarships pages for further details.

How do I arrange accommodation?

All enquiries concerning accommodation should be directed to Student Services, telephone number +44 (0)118 378 5555.

Additional information

Careers

Careers in Financial Engineering

Many of our financial engineering graduates are now working as Quants in large London banks and other financial institutions. Others have pursued PhDs and have successful academic careers.

Financial instruments are becoming ever more sophisticated, so graduates that understand complex modelling techniques are always in great demand. The high quantitative content of this programme opens many doors to a wide range of careers. You could structure and develop new debt or equity solutions to meet clients funding and hedging needs, or you could become a proprietary trader in exotic derivatives, or a software specialist or a quantitative analyst supporting the traders.

There are excellent opportunities on the buy-side, with hedge funds and investment institutions, as well as in investment banking and in software analytics. Opportunities in quantitative research, or with a rating agency, are among the many other attractive alternatives. Outside of mainstream
banking and investment, you might also consider firms involved in commodity and energy trading, or the treasury divisions of leading multinationals and management consultancies.

For more information regarding graduate destinations, please visit www.icmacentre.ac.uk/careers.

Professional Development and Accreditation

CISI Diploma

Students are eligible for exemption from one Diploma module:

  • Financial Derivatives

 

Further information is available regarding exemptions in MScs and Professional Qualifications.

Module listing and descriptions

NB. All our Masters degrees comprise a total of 180 credits: 80 credits at Part One and 100 credits at Part Two. Please note that module titles or content may vary each year.

Part 1 Modules

Part 1 Modules

NB: Students may only choose one of either 'Quantitative Methods for Finance' or 'Financial Markets'.

Securities, Futures and Options

Module convenor: Professor Chris Brooks20 credits

Introduces techniques for analysing and valuing different classes of risky assets. It also develops ways of optimally selecting portfolios of such assets and develops models of how these portfolios may be priced in financial markets. The techniques introduced in this module are widely applied in other elements of the programme. Outline: Financial assets and investing in securities markets; Investors and their objectives; Risk and capital allocation; Optimal portfolio selection; Capital asset pricing model; Single index and multifactor models; Arbitrage pricing theory; Derivative securities and the no-arbitrage principle; Forwards and Futures contracts; Simple hedging; Options basic properties and trading strategies.

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Quantitative Methods for Finance

Module convenor: Professor Carol Alexander20 credits

The objective of the module is to give students a thorough grounding in the essential mathematical methods used in finance, including basic principles of calculus, linear algebra, statistics, probability and regression. Students apply these skills to the fundamental problems in finance, such as compounding interest, pricing and hedging options, portfolio volatility, portfolio beta and simulation. The theory is illustrated by numerous examples and Excel spreadsheets.. The very high practical content will make it accessible to all students, even those with little previous training in mathematics.

Outline Content

  • Foundation
  • Descriptive Statistic
  • Calculus
  • Linear Algebra
  • Probability Theory in Finance
  • Regression
  • Numerical Methods

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Financial Markets

Module convenor: Dr Alfonso Dufour20 credits

Provides knowledge of global financial markets, the importance of liquidity, the distinction between exchange versus OTC markets, primary and secondary markets and the role of intermediaries in their various forms. Participants will gain an understanding of: international stock and bond markets, repo markets (for borrowing/lending on a secured basis); an introduction to foreign exchange and money markets, and to futures markets (which are developed in more detail in optional Part 2 modules); finally specific markets for commodity and energy are studied in more detail.

Outline content

  • General introduction to world financial markets
  • Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms
  • Short-term debt securities issued by government and corporations
  • Classification of bonds according to issuer: government, agencies, corporate and municipa
  • Comparison of bond markets in major countries and a description of the main intermediaries and their role
  • Foreign exchange market, quotation conventions, types of brokers, central banks? policies
  • Primary and secondary stock markets
  • Futures markets
  • Commodities markets
  • Energy markets.

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Derivatives Pricing

Module convenor: Dr Emese Lazar10 credits

The aim of the module is to convey the basic concepts and analytical methodology for the valuation of derivatives in the standard Black-Scholes framework. By the end of the module, it is expected that the student will be able to: derive the price and the hedging parameters for a variety of equity based derivatives; digest literature on equity based derivatives at the introductory level; work in a support function, such as product structuring, in a derivatives business and use this as a platform for further research.

Stochastic Calculus for Finance

Module convenor: Mathematics Department10 credits

Presents the basics of stochastic calculus for Brownian motion as used in contemporary finance, in an elementary fashion with plenty of practice. By the end of the module, it is expected that the student will be able to work with the principal stochastic differential equations that are used in derivative modelling and other areas of quantitative finance, and understand the theoretical concepts of stochastic integration.

Outline content

  • Outline of where stochastic calculus is used in finance
  • Brownian motion
  • Martingales
  • Itô Stochastic Integration
  • Itô Calculus
  • Stochastic Differential Equations used in finance
  • Change of probability, change of numeraire, and its use in derivative valuation

Mathematical and Numerical Methods

Module convenors: Dr Emese Lazar  | Mathematics Department  | 10 credits

This module introduces students to the mathematical tools needed for derivatives pricing. Namely, it covers special topics in calculus for finance, optimization and the numerical implementation of the models covered in ?Derivatives Pricing?. It also presents the latest methodologies in calibration and interpolation. The module puts emphasis on presenting the methodologies and the possible applications will also be covered, using computer programmes.

Outline content

  • ODE's, PDE's and their application in finance (including the heat equation)
  • Transform methods (Laplace, Fourier)
  • Optimization, Calibration and Interpolation
  • Binomial and trinomial trees, using backward recursion and forward induction
  • Finite difference methods for solving parabolic partial differential equations for derivative prices; Random number generation
  • Simulation methods; variance reduction methods
  • Simulation of stochastic differential equations

Probability for Financial Engineering

Module convenor: Tobias Kuna10 credits

This module introduces students into the mathematical tools of probability underlying the understanding of probabilistic approaches to finance and necessary for understanding stochastic analysis. Namely, it covers basic concepts and methods of modern probability placing emphasis on presenting the methodologies and the possible applications in finance.

Outline Content

  • Concept of Probability
  • Standard Distributions
  • Random Variables, their Distributions and their Characteristics
  • Joint Distribution
  • Independence
  • Conditional Probability and Expectation
  • Expectation, Variance, Covariance, and Correlation
  • Law of Large Numbers and Central Limit Theorem

Part 2 Modules (Compulsory)

C++ for Financial Engineering

Module convenor: TBC10 credits

Designed for future quants and financial engineers to introduce them to the main types of problems they will be asked to solve and to make them aware of the range of issues they will have to consider. Financial engineering is the art of designing and implementing innovative solutions to financial problems. This course explores a number of typical problems faced by both financial and non-financial institutions for which a range of solutions, often using derivative products, is possible. In each case we examine the feasibility and relative advantages and disadvantages of alternative solutions, taking into account legal, accounting, tax and regulatory matters as well as risks and returns. By the end of the module, it is expected that students will have reached:
  • A working understanding of main types of derivative and hybrid instruments (equity swap, interest rate swaps, options, convertibles, CDSs, CDOs)
  •  An awareness of the legal, tax, accounting and regulatory environment in which these instruments may be used
  • An understanding of the main types of financial problems face by firms in fund raising, creation of capital, merger and acquisition, long term investments, risk management and incentive schemes
  • A working knowledge of pricing and evaluation methods for derivative products
 

Outline Content

  • Facilitation of acquisition and disposal of shares, preparation for mergers – Equity swaps, CVRs and quantity options
  • Tax efficient structures and strategies – Long term investment products, tax efficient financing, executive incentive schemes
  •  Creation of cheap Tier 1 and upper Tier 2 capital for banks – Convertibles and other hybrids
  • Market risk management – Index linked structured products, overlay strategies, dynamic control strategies
  • Credit risk management – credit risk protected loans, CDSs and securitization

Topics in Financial Engineering

Module convenor: Dr Jacques Pezier10 credits

Designed for future quants and financial engineers to introduce them to the main types of problems they will be asked to solve and to make them aware of the range of issues they will have to consider. Financial engineering is the art of designing and implementing innovative solutions to financial problems. This course explores a number of typical problems faced by both financial and non-financial institutions for which a range of solutions, often using derivative products, is possible. In each case we examine the feasibility and relative advantages and disadvantages of alternative solutions, taking into account legal, accounting, tax and regulatory matters as well as risks and returns.

Outline content

  • Facilitation of acquisition and disposal of shares, preparation for mergers - Equity swaps, CVRs and quantity options
  • Tax efficient structures and strategies - Long term investment products, tax efficient financing, executive incentive schemes
  • Creation of cheap Tier 1 and upper Tier 2 capital for banks - Convertibles and other hybrids; Market risk management - Index linked structured products, overlay strategies, dynamic control strategies
  • Credit risk management - credit risk protected loans, CDSs and securitization.

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Equity and Foreign Exchange Derivatives Modelling

Module convenor: Dr Leonardo Nogueira10 credits

This module introduces extensions to the Black-Scholes framework to accommodate the empirical evidence from equity and FX markets, namely stochastic volatility and jumps. It also reviews some exotic instruments and the techniques for their pricing and hedging. By the end of the module, it is expected that students will be able to:
  • Outline the possible extensions to the Black-Scholes model
  • Price and hedge options in the presence of jumps and/or stochastic volatility
  • Describe what is meant by an incomplete market and how this affects the pricing and hedging of options
  • Differentiate between dynamic replication and static replication of exotic options
 

Outline content

The module has two parts (not necessarily on this order): Part I: Instruments
  • Futures and forwards
  • Vanilla options and implied volatility smile
  • Convertible securities
  • Exotic options
  Part II: Models
  • Extensions to the Black-Scholes framework
  • Review of Black-Scholes assumptions and empirical evidence from equity and FX markets
  • Smile-consistent models
  • Stochastic volatility models
  • Jump models
  • Discussion on calibration and risks associated with the choice of a model
  • Pricing and Hedging of Exotic Instruments
  • Techniques to price exotic options
  • Static replication versus dynamic replication
  • Hedging in incomplete markets
 

Interest Rate Derivatives Modelling

Module convenor: Dr Leonardo Nogueira10 credits

To convey the basic concepts and analytical methodology for interest rate modelling and the valuation of interest based products. By the end of the module, it is expected that the student will be able to:
  • Work with some of the state of the art interest rate models
  • Price interest rate products and equity derivatives under a stochastic interest rate
  • Digest literature on interest rate modelling at an the introductory level
  • Work in a support function, such as product structuring, in a derivatives business
  • Use this as a platform for further research
 

Outline content

The module has two parts (not necessarily on this order): Part I: Instruments
  • Forward rate agreements
  • Bond futures (Eurodollar, T-bond, gilt, etc.)
  • Swaps
  • Caps, floors and swaptions
  Part II: Models
  • The classical interest rate models of Vasicek, CIR, Ho-Lee, Hull-White
  • The Heath-Jarrow-Morton modelling framework
  • The Libor market model
  • Valuation of interest based derivatives using the above interest rate models
  • Discussion on calibration of models

Credit Derivatives Modelling

Module convenor: Dr Leonardo Nogueira10 credits

This module familiarizes the students with the necessary tools to model credit risk. It explores the different approaches to credit risk analysis. The models are then applied to the valuation and hedging of the essential types of credit derivatives. In addition, typical trading strategies in the credit markets are analysed. By the end of the module, it is expected that students will be able to:
  • Describe and analyse the main approaches in modelling credit risk
  • Apply the related mathematical tools
  • Identify the major credit derivatives
  • Present and appraise the pricing methodologies
  • Describe and analyse some popular trading strategies
 

Outline content

The module has two parts (not necessarily on this order): Part I: Instruments
  • Simple credit derivatives: CDS, CLN, TRS
  • Basket credit derivatives
  • Structured credit products: ABS, MBS, CDO
  Part II: Models
  • Tools for credit risk modelling
  • Credit derivatives in practice
  • Valuation and trading of credit default swaps
  • Valuation and trading of basket swaps and structured products

Essentials of Financial Engineering

Module convenor: Dr Marcel Prokopczuk10 credits

The module provides an introduction to the basic techniques employed in Financial Engineering. Students will understand how these methods can be applied to design securities with desired payoff characteristics. They will be able to evaluate complex securities by means of reverse engineering and be aware of possible problems when these methods are applied in real world situations.

Outline content: Introduction to Financial Engineering, cash flow engineering, basic financial products, interest and forward rates, no-arbitrage and the law of one price; Pricing and hedging by replication, major interest rate (IR) swap structures, IR swaps, currency forwards and cross currencies FX-swaps, options; Structured products, introduction and evaluation; Dynamic strategies for hedging and principal protection; Credit markets: CDS engineering, credit indices and CDO's.

Part 2 Modules (Optional)

Choice of 40 credits from:

Bond Market Pricing and Trading Strategies

Module convenor: Dr Andy Bevan20 credits

The main aims of the module are to identify the fundamental determinants of short- and long-term interest rates, learn how to monitor developments in interest rate markets and employ commonly used trading strategies. The course will be based around the work of a research department in an investment bank when formulating strategy for its proprietary trading desk and hedge fund customers. Each lecture will provide: (1) a concise outline of economic theory, (2) practical examples of events in markets from recent years, and (3) identification of trading strategies. Seminars will focus on market pricing conventions and worked examples. By the end of the module it is expected that students will:
  • Be aware of the main aspects of the economic theories of the determination of interest rates and corporate credit spreads
  • Be capable of analyzing economic situations to determine the likely implication for various assets in the interest rate markets
  • Be familiar with the principal strategies used in trading short rates, long rates and credit spreads

Outline content

  • Flow of Funds and the Economics of Interest Rates
  • Monitoring Central Banks and the Determination of Short Rates
  • Pricing and Trading of Short Rate Instruments
  • Fundamentals of Bond Pricing, Duration and Convexity
  • Fitting the Yield Curve and Theories of the Term Structure
  • Trading of Bonds, Bond Forwards and Futures
  • Pricing and Trading of Interest Rate Swaps
  • Default Risk and Corporate Bond Spreads
  • Corporate Bond Spreads Through the Business Cycle
  • Pricing and Trading of Credit Default Swaps

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Financial Econometrics

Module convenor: Dr Alfonso Dufour20 credits

Building on the material introduced in Quantitative Methods for Finance, this module examines a number of additional techniques that are relevant for financial applications, and in particular for modelling and forecasting financial time series. An introduction to the methods of maximum likelihood estimation and Generalised Method of Moments will be given, and emphasis will be placed on modelling high-frequency data. Case studies from the academic finance literature are employed to demonstrate potential uses of each approach. Extensive use is also made of financial econometrics software to demonstrate how the techniques are applied in practice. By the end of the module, it is expected that the student will be able to
  • Describe, estimate and evaluate a number of different approaches for modeling financial data with particular emphasis on trade data
  • Determine the appropriate class of models to address a particular problem in empirical finance
  • Compare and contrast a number of methods for modeling and forecasting the volatility of financial time series
  • Write programs in a statistical software package in order to achieve particular tasks that cannot be accomplished using built-in functions
  • Comprehend and critically evaluate the use of econometrics in the published academic finance literature
 

Outline content

  • Stylised characteristics of financial data
  • Ordinary Least Squares (OLS)
  • Relaxing the OLS assumptions
  • Simultaneous equations models
  • Vector autoregressive models
  • Cointegration
  • Maximum Likelihood estimation method
  • Panel data analysis
  • Simulations methods in econometrics and finance

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Hedging

Module convenor: Dr Jacques Pezier20 credits

This course is designed for students seeking a career in ?front office? risk management whether in banks, fund management or corporate treasury. Hedging is financial risk management in action; it is often cited as the raison d?etre of derivatives markets - trading and arbitrage playing the supporting roles of providing liquidity and keeping prices fair and thus facilitating hedging. Corporates can reduce uncertainty by hedging away financial risks that fall beyond their areas of competence; fund managers can design hedge strategies that provide risk/reward profiles tailored to their clients; but it is in banking, which core activity is financial risk management, that efficient hedging makes the difference between success and failure. This course examines the rationale for hedging and the methods for doing it efficiently in a variety of circumstances. We review the wide range of market risks (currency, interest rate, equity and commodity) and credit risks for which there is a growing derivatives market. Particular attention is given to the thorny issue of optimal dynamic hedging with transaction costs. A basic understanding of stochastic processes and risk analysis methods is indispensable to address these issues as well as a basic knowledge of financial instruments and trading mechanisms. Only students with good quantitative skills and a basic knowledge of derivative products should take this course.

Outline Content

 
  • Financial risks and hedging principles
  • Market Risk: Static Hedging
  • Hedging with forwards, futures and swaps
  • Dynamic delta hedging; risk attitude
  • Gamma and volatility hedging; portfolio insurance
  • Credit Risks: Credit derivatives and other credit risk mitigants
  • Multifactor hedging: Forex and interest rate risks
  • Hedge accounting; regulatory and economic capital
  • Performance measures and risk aggregation in firms
  • Hedging programmes and case studies

Available learning modes:

  • Full time

Liquidity Risk

Module convenor: Dr Alfonso Dufour10 credits

The evolution of algorithmic trading, the proliferation of alternative trading platforms for trading the same security and the development of new products and assets with limited liquidity have contributed to raising the awareness of academics and traders on the importance of understanding and properly managing liquidity and execution risks. The objective of this course is to give students an introduction to liquidity and execution risks and an overview of the methods for managing these risks. The issues discussed in this course are important when developing trading strategies, valuing portfolios, liquidating large positions and transitioning assets to new investments. By the end of the module, it is expected that the student will be able to
  • Explain the concepts of high frequency trading and algorithmic trading.
  • Identify the characteristic elements of alternative algorithmic trade execution strategies
  • Explain how to measure and manage trade execution risk and compute liquidity adjusted VaRs
  • Solve simple trade execution problems and develop optimal execution strategies
  • Understand the impact of recent regulatory changes on the market and market players

Outline content

  • Introduction to the Security trading industry. Algorithmic Trading. Liquidity and liquidity risk. Liquidity suppliers.
  • An example of algorithmic execution strategy: VWAP
  • Transaction Cost Analysis (TCA). A framework for measuring and managing trade execution costs.
  • Optimal execution strategies and liquidity adjusted value at risk of asset holdings
  • Understanding, modeling and predicting execution risk
  • MiFID and Reg-NMS. Recent regulatory trends and expected impacts on markets (competition, transparency and best execution)
 

Available learning modes:

  • Full time

Market Risk

Module convenor: Dr Emese Lazar20 credits

This module provides an understanding of the Value-at-Risk (VaR) framework for market risk assessment and control. The module has a significant practical component with computer-based workshops that are designed to support the lecture material. By the end of the module, it is expected that students will:
  • Understand the latest developments in banking regulations that are the main driving force behind changes in our approaches to risk measurement
  • Outline the foundations of market risk analysis and the basic models for assessing market risk
  • Describe the market risk measurement techniques that are used daily in the front and middle offices of banks; particular emphasis is placed on the appraisal of the covariance matrices that are used to measure the market risk of portfolios
  • Be able to build various Value-at-Risk (VaR) models for market risk for international portfolios of equities, FX, interest rate products, commodities, derivatives etc.

Outline content

  • The characteristics of markets and market risk
  • Capital requirements & RAPM
  • Value at Risk models
  • Advanced VaR models
  • Applications to Equities
  • Applications to Foreign exchange
  • Applications to Interest rate products
  • Applications to Derivatives
  • Applications to Fund management, banking & non-financial firms

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Portfolio Management

Module convenor: Dr Jacques Pezier20 credits

The module aims to build on the techniques for portfolio selection that will have been introduced in the Valuation of Securities module. The module will address both the theory and practice of portfolio management.
  • The theoretical part will examine the issues involved in constructing an investment portfolio, evaluating the performance of that portfolio, and adjusting its composition through time to ensure that its performance remains optimal. It will also consider the use of derivatives in managing risk.
  • The practical part will provide students with hands-on experience of constructing and managing an equity portfolio.

Outline content

  • Diversification
  • Financial instruments and markets
  • Passive asset allocation
  • Active portfolio management
  • Equity analysis
  • Bond analysis
  • Derivatives for fund management (forwards/futures/swaps/options)
  • Hedging/ portfolio insurance
  • Investment strategies/ Performance measurement
  • Fund management in practice

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Research Project

Module convenor: Professor Charles Sutcliffe20 credits

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor. The Learning Outcomes of this module are:
  • Successful completion of the research project requires students to define and execute a piece of research in finance.
  • They will be required to seek out and to critically evaluate published literature in a particular field.
  • Students will improve their report-writing skills, learning how to structure their study, and how to place their findings in the wider context
 

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

Volatility Analysis

Module convenor: Professor Carol Alexander20 credits

Provides an in depth understanding of the different approaches to modelling financial market volatility in discrete and continuous time. The module will focus on GARCH statistical models and the local and stochastic volatility models that are now in standard use by leading industry practitioners, and which have been the subject of extensive academic research. It is has a high quantitative content and a significant practical component with computer-based workshops (face-to-face and distance) designed to support the material.

Outline content

  • Statistical models of Volatility and Correlation
  • Normal mixture models
  • Normal and normal mixture GARCH
  • Principal Component Analysis: Applications to building covariance matrices
  • Modelling Implied Volatilities and their dynamics
  • Local Volatility models
  • Stochastic Volatility Models
  • Hedging

Available learning modes:

  • Full time
  • Flexible learning
  • Distance learning

As an alternative, students can take up to 20 credits from the ICMA Centre annual list of Part 2 optional modules.

Come and see us

Why not make an appointment to come and visit. You can chat with our Admissions and Careers teams and a member of academic staff. Email admissions@icmacentre.ac.uk or call +44 (0)118 378 8239.

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