*Conducted in term:*2020Z

*Erasmus code:*14.3

*ISCED code:*0311

*ECTS credits:*4

*Language:*English

*Organized by:*Faculty of Economic Sciences

*Related to study programmes:*

# Risk Analysis and Modelling I 2400-QFU2RAMI

The seminar focuses on the modern risk evaluation and management. We consider: liquidity risk, interest rate risk. Additionally the normative aspect of supervisory regulation in financial institutions is briefly mentioned. Especially we concentrate on:

1. liquidity gap analysis, costs of liquidity (alternative costs of funds and risk neutral probability premium), forecast of liquidity with simple and advanced methods, like for example ARIMA, replicating portfolio approach, liquidity indicators.

On computers we execute: liquidity forecast, estimation of core deposits in bank, calculation of replicating portfolio, calculation and investigation of liquidity adjusted value at risk.

2. measurement of interest rate risk: interest rate gap, duration, convexity (other advanced measures), interest rate modeling: spot rate curve estimation (Nelson-Siegel approach), introduction to modeling short rate evolution via stochastic models (e.g. Vasicek model), interest rate risk management: goals of management based on the duration analysis.

On computers we execute: simulation of net income affected by interest rate changes, duration analysis with extensions (for example, scenario simulations), impact of normative regulations on the choice of interest risk evaluation in financial institutions, estimation of yield curve based on stochastic evolution of spot rates.

## Type of course

## Course coordinators

## Mode

## Learning outcomes

Student has knowledge about types of financial risk, basic method of measuring and managing the risk in financial institutions and enterprises. S2A_W06, S2A_W07

Student can evaluate basic types of risk with simple models created in spreadsheet. He or she is able to recognize the impact of regulatory requirements on risk assessment. Student can apply different risk measures to the purposes of risk analysis, for example to calculate the gains or losses on the position or to increase the net income of the investment without rapid growth of risk. S2A_U02, S2A_U03, S2A_U04, S2A_U05, S2A_U06

Student is aware of how risk management can reduce the regulatory capital requirements and ensure the compliance with risk standards. The student implements the credit requirements on time. S2A_K01, S2A_K03, S2A_K04, S2A_K07

## Assessment criteria

The final exam consists of 10 “true/false” questions with explanation. Only explanations are assessed and summed up. Max. two absences are acceptable.

In the case of online course there will be four multiple choice tests about the understanding of concepts presented during the seminar and at the end two task to do: one in excel and one in R. They will be prepared in the real time..

## Bibliography

REQUIRED:

1. L. Matz, P. Neu, "Liquidity risk measurement and management", John Wiley & Sons, 2006 (selected chapters)

3. D. Uyemura, D. van Deventer, „Financial risk management in banking", Probus Publishing, 1993

RECOMMENDED:

1. K. Dowd, "Measuring market risk", John Wiley & Sons, 2005 or

2. C. Alexander, “Quantitative methods in finance”, Volume 1 & 4, Wiley, 2009

## Additional information

Information on *level* of this course, *year of study* and semester when the course
unit is delivered, types and amount of *class hours* - can be found in course structure
diagrams of apropriate study programmes. This course is related to
the following study programmes:

Additional information (*registration* calendar, class conductors,
*localization and schedules* of classes), might be available in the USOSweb system: