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• Soft Skills

From theory to practice in finance. The course presents with a case-study approach some significant examples where a financial engineer could provide a relevant contribution:

1. Credit Risk: single-name and multi-name products;
2. Quantitative Risk Management (RM): from RM Measures to RM Techniques;
3. Structured products: calibration, valuation and some hedging issues.

This teaching includes a version of 10 cfu, which is linked to a joint-course teaching by 8 cfu called FINANCIAL ENGINEERING (course 052505). This form defines objectives, programs and learning outcomes expected for both courses.

Both versions of the course have the following common learning goals:

1. to know and to understand

 -  fundamental risk measurement techniques (e.g. sensitivities, VaR, ES);

 -  their limits of applicability;

 -  some risk management techniques;

 -  single name and multi-name credit problems and models;

 -  main structured product typologies.

2. to apply this knowledge on some "Quantitative Case Studies" via the

 -  valuation of the relevant financial quantities (e.g. Net Present Value of some financial portfolios, risk measurement);

 -  calibration of underlying models;

 -  selection of an adequate risk management instrument/trading strategy.

It is expected an understanding by the student not limited to the definitions, the main results and the solution of standard exercises, but a critical knowledge able to discriminate different financial situations and a conscious model selection, justifying the chosen approaches.

Moreover the student should obtain correct solutions, explain adequately the codes, and expose properly the theory.

0. Basic derivatives’ concepts

It is advised to pass Mathematical Finance II before starting this course. In particular course presequisite are:

The are five possible examination appeal dates, established in the academic calendar (two in June/July, one in September, two in January/February). Each exam appeal is composed by a written part and an oral part.

In the written part, the student is required to write:

 -  Matlab codes that solve some financial engineering problems;

 -  a document describing the chosen methodology, numerical results and problems/criticalities (if present).

The written and the oral part contribute to the final score with the same weight (15/30).

The examination appeal for the 8 cfu version, called FINANCIAL ENGINEERING (course 052505), does not include arguments specific of the 10 cfu version (both in the written and oral part).

The examination has the objective to verify whether the student has acquired the following skills:

1. The knowledge of

 -  fundamental risk measurement techniques (e.g. sensitivities, VaR, ES);

 -  their limits of applicability;

 -  some risk management and quantitative finance approaches;

 -  single name and multi-name credit problems and models.

2. The ability in applying the acquired knowledge in the computational/mathematical approaches for the

 -  calibration of financial models from real datasets;

 -  valuation/risk measurement/risk management of portfolios of elementary/structured products in presence of market and credit risks.

Risk Management

Credit Risk