COMPG004 - Market Risk Measures and Portfolio Theory
This database contains the 2017-18 versions of syllabuses. Syllabuses from the 2016-17 session are available here.
Note: Whilst every effort is made to keep the syllabus and assessment records correct, the precise details must be checked with the lecturer(s).
|Prerequisites||Knowledge of linear algebra, probability and stochastic process theory. Introductory course in Financial Mathematics.|
|Taught By||Camilo Garcia Trillos (100%)|
The module aims to familiarise students with key concepts and models in general asset pricing, portfolio theory, and risk measurement. Those concepts and models include risk aversion, utility functions as a representation of preferences, efficient frontiers, Markowitz Portfolio theory, the Capital Asset Pricing model, Value at Risk, and Expected Shortfall.
- Introduction: Abstract market mathematical modelling. Main assumptions. Risk.
- Utility functions: properties, examples, related concepts
- Risk measures: utility-based, tail-based, coherent, convex. Notable examples: value at risk, expected shortfall.
- Risk treatment: avoidance, reduction (hedging, diversification), sharing (insurance, outsource), retention (capital).
- Pricing rules
- Consumption-investment problems
- Performance measurement and efficient frontiers
- Equilibrium pricing models: Example CAPM (*)
- Factor models
- Risk measure estimation
- Probability and Markov chains in general states
Numerical tools (Python)
- loops and functions
- Monte Carlo methods
- Linear algebra operations
- Data import
- Hypothesis testing
- Optimisation routines
Method of Instruction
3 hours of lectures per week. 1 hour of demonstration lecture. Additional online material.
The course has the following assessment component:
- Written examination (2.5 hours, 100%)
To pass this course, students must:
- Obtain an overall pass mark of 50%
Students will also have homework assignments and online tests to complete.
Reading list available via the UCL Library catalogue.