MATH40720

Learning Outcomes:

Understand financial markets, types of markets, including equity, debt, derivative, and alternative investments.
Understand the nature of market risk and liquidity risk, how these risks manifest themselves in different financial instruments and also their impact on financial institutions.
Understand the main sensitivity measures used to quantify market risk including interest rate duration, equity beta and option Greeks.
Understand the use of Principal Component Analysis to model interrelated systems of random variables such as yield curves and applying this technique to market risk measurement problems.
Quantification of market risk using Value at Risk and Expected Tail Loss. Understanding the main types of VaR models, variance covariance, historic simulation, and Monte Carlo simulation.
Back-testing VaR and ETL models.

Student Effort Hours:

Approaches to Teaching and Learning:

Requirements, Exclusions and Recommendations

Students must have taken first courses in Calculus, Mathematical Analysis and Probability, equal or equivalent to MATH10350, MATH10320 and STAT20110, respectively. Students must also have taken first and second courses in Linear Algebra, equal or equivalent to MATH10340 and MATH20300.

MATH40430 must be taken concurrently if the student hasn't already taken a first course in Measure Theory and Integration equal or equivalent to MATH30360/MATH40430. The same applies to ACM30080 if the student hasn't already taken a first course in Partial Differential Equations equal or equivalent to ACM30080/ACM30220.

Module Requisites and Incompatibles

Assessment Strategy

Feedback Strategy/Strategies

• Group/class feedback, post-assessment

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