Basics in portfolio theory, term structure and its stochastic evolution, option theory.
The specific objectives of the course in Management, Finance and International Business in mathematics and statistics are to prove the necessary quantitative knowledge for understanding the patterns underlying the risk management of financial intermediaries.
Consistent with these objectives will be presented simple mathematical models for measuring and controlling credit risk and operational. The main purpose of the course is that the student approachs a number of sophisticated techniques and concepts in a simple way.
a Credit risk
1. Introduction Definitions : exposure at default, event of default, severity and recovery rate Conditional and unconditional default probabilities. Bernoullian approach: expected loss, unexpected loss and Economic capital
2. Default probability Historical and risk neutral default probability default probability from bond spread Discriminat analysis Merton's model KMV
3. Structural models and reduced form models Merton Jarrow e Turnbull Jarrow, Lando e Turnbull
4. Portfolio models default correlation Gaussian copula Credit Metrics Portfolio Manager Credit Portfolio View Credit Risk Plus
5. Credit derivatives : definition and pricing Credit default products. Basket products; the k-to default CDS, Collateralized Debt Obligation, CDS indices: CDX and iTRAXX
B. Operational risk
Characteristics of operational risk data. classification: Event Types and Business lines Basic indicator approach, Standardized method and AMA LDA ( Loss Distribution Approach) : severity and frequency distribution AExtreme value theory: POT and Block maxima
-An Introduction to credit risk modeling Bluhm, Overbeck and Wagner. Chapman & Hall CRC financial Mathematis series.
-Advanced Credit Risk Analysis: Financial Approaches and Mathematical Models to Assess, Price, and Manage Credit Risk, Cossin and Pirotte. Wiley & Sons
- John C. Hull. Risk management e istituzioni finanziarie Perason
- Risk Management and Shareholders' Value in Banking: From Risk measurement Models to Capital Allocation Policies; Andrea Resti, Andrea Sironi
Frontal lecturing, class-room laboratories, and e-learning
The final exam consists of three oral questions that cover the following topics: credit risk, credit derivatives and operational risk.