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Econometric Risk Management in Finance


  • Tutorial/Classwork on Tuesday 20, January 2015, 10:00-12:00 is scheduled in Room HS 1224
Instructor: Assoc. Prof. A. Sevtap Kestel, Ph.D.
Tutor: Chulpan Zinnatullina

Monday, 12 January 2015, 10:00 - 12:00, HS 1228
Monday, 12 January 2015, 12:00 - 14:00, HS 1228
Tuesday, 13 January 2015, 10:00 - 12:00, HS 1224
Tuesday, 13 January 2015, 16:00 - 18:00, HS 1132
Wednesday, 14 January 2015, 12:00 - 14:00, HS 220 (Alte Uni)
Wednesday, 14 January 2015,14:00 - 16:00, HS 1231
Thursday, 15 January 2015, 14:00 - 16:00, HS 1134
Thursday, 15 January 2015,16:00 - 18:00, HS 1108
Monday, 19 January 2015, 10:00 - 12:00, HS 1228
Monday, 19 January 2015,12:00 - 14:00, HS 1108
Tuesday, 20 January 2015,10:00 - 12:00, HS 1224
--> rescheduled as Classwork/Tutorial
Tuesday, 20 January 2015, 16:00 - 18:00, HS 1132

PC Tutorial:

Friday, 16 January 2015, 13:00 - 15:00, room -1001b (KG II)
Wednesday, 21 January 2015, 14:00 - 16:00, room -1001b (KG II)
Friday, 23 January 2015, 13:00 - 15:00, room -1001b (KG II)
invited speaker

Credit points: 4 credits
Language: The course is taught in English.
Target group: The course is open to Diploma and Master students.

Knowledge in Principles of Finance, Econometrics will be an advantage to follow the theoretical part of the course.

Summary: Highly changing demand and supply structure in the market, increasing effect of globalization, economic fluctuations, environmental disasters are just some of the challenges that economies have to consider. For these reasons Risk Management became one of the vital steps to be taken as an important part of the economic policy. This course provides an overview on the risk management techniques, especially, on finance by using econometric and statistical techniques. The main parts of the course are quantitative analysis and the components of risks related to financial markets. The quantitative part contains characterizing random variables, linear transformation of random variables and their distributions, simulation technique, simulation of Markov processes and yields, VaR methods, linear models, time variation at risk, GARCH, EWMA, Risk adjusted performance measures, risk and risk aversion with utility functions and expected values, stress testing and back testing. Risk management practices introduce the analyses of market, credit, operational and investment risk in general. Case studies discussing current examples of the lack of proper risk management in world-wide known companies in last decade constitute the application part of the lecture which will be covered during the lectures and tutorials.
  1. Introduction
    Risk management definition, steps and major techniques; risk aversion, utility and expectation, Jensen’s  inequality, Example:Determination of optimal insurance premium by utility theory
  2. Quantitative Analysis: Random variable, linear transformation of random variables, sum and portfolios of random variables and their distributions, Simulation techniques
  3. Risk Management practices: Market risk management, credit risk management, operational risk management, investment risk management, Basel II.
  4. VaR, Simulating VaR, Markov process, yields, Risk adjusted performance measures, The mean-variance criterion, stress testing, back testing.
  5. Linear models, time variation at risk, GARCH, EWMA
  6. Case studies such as Lehmann Brothers, Enron, AIG
Main references:
  • Financial Risk Manager Handbook by Philippe Jorion, 6th Ed., John Wiley and Sons, 2009.
  • Risk Management by Michel Crouhy, Dan Galai, Robert Mark, McGraw Hill, 2000.
  • Investment Risk Management by  Yen Yee Chong, John Wiley, 2004.
Final Exam
(90 minutes):
  • 5 March 2015, 9:00-11:00, HS 1098
  • 7 July 2015, 8:00-10:00, HS 3219



Abteilung für Empirische Wirtschaftsforschung und Ökonometrie

Raum 2309

Platz der Alten Synagoge

D-79085 Freiburg

Tel.: 0761 203-2338

Fax: 0761 203-2340

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