Quantitative principles of risk management
Integrated course, 4.00 ECTS
The course is designed to teach quantitative methods, which we build on in further courses. Stochastic basic concepts will be introduced and the advantages and problems of selected stochastic methods (normal distribution, value at risk etc.) in practical use will be shown. The focus is on the application of stochastic methods.
The core contents include:
 Random variables and risk; distribution and density; moments of a distribution;
 Properties of the expected value and variance;
 normal distribution: central limit theorem, properties, standardization of random variables;
 Risk measures: volatility, value at risk; expected shortfall;
 Non-symmetric or heavy-tailed distributions;
 Aggregation of independent risks: e.g. individual risk model in a non-life insurance application, calculation of portfolio moments;
 Random vectors; stochastic dependence; correlations; Copulas concept;
 Empirical data analysis (possibly supported by software);
 Moments of an empirical distribution; parameter estimation by moment matching.
Optional contents may include:
 Binomial distribution; binomial trees;
 Random walks; Vienna processes.
Graduates have basic knowledge of stochastic concepts that can be used to describe financial risks. They have quantitative methodological competence, which is central to the description of risk and the measurement of value-based corporate success.
Graduates have detailed knowledge of the basic mathematical/statistical methods of quantitative risk management in banks and insurance companies, recognize methodological problems in quantitative risk management and know how to apply the learned methods with the help of computers, have the ability to procure/collection, processing, analysis and clear presentation of financial data (IT supported);
Recommended or required reading and other learning resources / tools
References: Albrecht/Maurer (2008): Investment- und Risikomanagement, Schaefer-Poeschel. Bessler et al (2013): Asset Management and International Capital Markets, Routledge. Fabozzi (ed., 2011): The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Wiley. Franke et al (2010): Statistics of Financial Markets: An Introduction, Springer. Hull (2012): Risk Management and Financial Institutions, Wiley. McNeil et al (2005): Quantitative Risk Management.
Steiner/Jankovic (2017): Der Jahresabschluss nach IFRS; Althoff (2012): Einführung in die internationale Rechnungslegung: Die einzelnen IAS/IFRS, Gabler. Coenenberg et al (2012): Jahresabschluss und Jahresabschlussanalyse, Schäffer-Poeschel. Küting et al (2010): Der Konzernabschluss, Schäffer-Poeschel. Pellens et al (2011): Internationale Rechnungslegung, Schäffer-Poeschel. PWC (2012): IFRS für Banken: Band I und II, pwc. Rockel et al (2012): Versicherungsbilanzen, Schäffer-Poeschel. Werner/Padberg (2006): Bankbilanzanalyse, Schäffer-Poeschel. Zielke (2005): IFRS für Versicherungen, Gabler.
Academic journals: Financial Markets and Portfolio Management, Journal of Asset Management.
Mode of delivery
4 ECTS Integrated Course
Prerequisites and co-requisites
Assessment methods and criteria
ILV: final exam, immanent assessment in the exercise part