MSc Financial Risk Management
Programme Content Part 1 (Compulsory Modules)
- Securities, Futures and Options
- Fixed Income and Equity Investments
- Quantitative Methods for Finance
- Financial Markets
Securities, Futures and Options
Convenor: John Board Credits: 20
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 Content: Financial assets and investing in securities markets; Investors and their objective; 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; Option pricing.
Fixed Income and Equity Investments
Convenor: John Evans Credits: 20
Applies general valuation methods to specific financial instruments: fixed income and equity securities. It describes the basic characteristics of each security and develops practical strategies for finding its value and assessing its risk. It develops general trading strategies for each type of security. It also considers how the markets for these securities are related and begins the task of showing how these relationships can be exploited to form an optimal investment strategy.
Outline Content:Sovereign and corporate bonds: Characteristics, prices and yields; The Term and risk structure of interest rate; Bond risk; Bond management: Active and passive strategies; Credit and credit default swaps; Securitisation; Top down fundamental management: Economic and industry analysis; Equity valuation I: Dividend growth, P/E ratios and earnings multiples; Financial statement analysis; Equity valuation II: Estimating share price and market strategies; Empirical evidence on market efficiency.
Quantitative Methods for Finance
Convenor: Carol Alexander Credits: 20
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.
Financial Markets
Convenor: Alfonso Dufour Credits: 20
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.
