This course examines financial organisations such as banks, insurance firms, pension plans, and fund managers, as well as their involvement in complex financial systems. Students will gain advanced knowledge of market risk management, with a focus on Value at Risk (VaR), interest rate risk, and derivative risk. The course also covers credit risk assessment, portfolio and counterparty risk analysis, and asset and liability management strategies. Learners will gain skills in detecting and mitigating operational, liquidity, and model risks and critical evaluation of post-crisis regulatory regimes such as Basel II.5, Basel III, and RAROC.

Module Aim

The course aims at enhancing students’ understanding various financial instruments options and how they can be used to prevent undesirable financial risks.

Module Learning Outcomes

Upon completion of this module, the student should be able to: 
1.    Critically analyse the roles and interrelationships of banks, insurance companies, and pension plans in financial markets.
2.    Evaluate the responsibilities and strategies of fund managers within complex financial risk systems.
3.    Demonstrate expertise in the application of Value at Risk (VaR) to assess and manage market risk.
4.    Apply advanced quantitative methods to evaluate interest rate risk and derivatives risk using the model-building approach.
5.    Assess and synthesise portfolio credit risk and counterparty credit risk in diversified financial environments.
6.    Integrate asset and liability management strategies to optimise risk mitigation in financial institutions.
7.    Critically evaluate operational, liquidity, and model risks and propose solutions for their effective management.
8.    Analyse and interpret the implications of Basel II.5, Basel III, and RAROC on financial institution regulation and performance.