B5498 - FINANCIAL MODELING AND RISK ANALYSIS

Conoscenze e abilità da conseguire

The course provides some basic concepts of financial economics and a practical understanding of financial risks as well as of contracts and methods for managing these risks under normal and stressful market conditions. Basics topics are introduced including the term structure of interest rates, annuities and loan repayment, bond pricing market risk, portfolio allocation, an introduction to derivatives and their use for hedging. At the end of the course, students will be able to manage market risk, credit risk and sovereign risk with a number of quantitative techniques.

Contenuti

Basic principles of financial mathematics: simple/commercial convention versus compound/instantaneous ones. Annuities-certain: present values and accumulations. Deferred annuities. Perpetuities. Loan repayment schedules. Project appraisal and investment performance. NPV, IRR.

Fixed income market: term structure of interest rate, spot rates, forward rates, yield-to-maturity, duration. Italian sovereign bonds. Green finance: green bonds and sustainability-linked bonds.

Valuation of risky investments. Expected utility. Stochastic dominance. Mean-variance. Risk and volatility. Value-at-Risk. Markowitz model for portfolio allocation.

Financial derivatives: forward contracts, futures, options

Testi/Bibliografia

S. J. Garrett. An Introduction to the Mathematics of Finance. Butterworth-Heinemann. Second edition

Metodi didattici

Lectures and exercises. Each topic is presented along with several examples and exercises. Some additional exercises will be discussed during the tutorial classes.

Modalità di verifica e valutazione dell'apprendimento

Written exam (duration 60 minutes) consisting of short exercises and one or two more complex problems. Please note that the relevant topics will be always proposed in the written exam.

The first call will consist of two separate written exams, each counting for 50% of the final assessment.

The use of textbooks, personal notes and other printed notes is allowed; tablets and cell-phones are not allowed. Do not forget to bring a calculating machine.

Further information on the exam will be provided during the first lecture of each module.

The use of AI is forbidden during the exam and any use will constitute a violation of academic integrity.

Strumenti a supporto della didattica

Slides. A list of exercises and some Excel speadsheets will be made available.

Orario di ricevimento

Consulta il sito web di Rossella Agliardi