NBS8201 : Risk Modelling
NBS8201 : Risk Modelling
- Offered for Year: 2024/25
- Module Leader(s): Professor Robert Sollis
- Owning School: Newcastle University Business School
- Teaching Location: Newcastle City Campus
Semesters
Your programme is made up of credits, the total differs on programme to programme.
Semester 2 Credit Value: | 10 |
ECTS Credits: | 5.0 |
European Credit Transfer System | |
Pre-requisite
Modules you must have done previously to study this module
Pre Requisite Comment
N/A
Co-Requisite
Modules you need to take at the same time
Co Requisite Comment
N/A
Aims
This module aims to provide students with a detailed understanding of the key mathematical and statistical techniques used by financial institutions (e.g. investment banks, insurance companies, hedge funds) for modelling the risks associated with their assets and liabilities. The module will also explain in detail how financial regulators influence the risk management strategies employed by financial institutions.
Outline Of Syllabus
This module concentrates on the techniques used for modelling three particular types of risk;
(i) interest rate risk
(ii) credit risk
(iii) market risk.
These techniques range from simple mathematical models, through to more complex statistical techniques such as Monte Carlo simulation. Empirical applications at the individual, company and country level will be employed to illustrate the techniques in action. Relevant financial regulations will also be critically analysed. A summary of the lecture schedule is given below.
1. Introduction and interest rate risk
- types of risk, the repricing model, the maturity model.
2. Interest rate risk
- duration, immunization, convexity.
3. Interest rate risk and credit risk
- forecasting interest rates, linear discriminant models, linear probability models.
4. Credit risk
- linear probability models, limited dependent variable models.
5. Credit risk and market risk
- default rate models, modelling and forecasting volatility.
6. Market risk
- VaR by historical simulation, VaR by the delta-normal approach, VaR by Monte Carlo simulation, backtesting VaR models.
7. Market risk
- backtesting VaR models, VaR and financial regulation, VaR and the 2008-2009 global financial crisis.
Learning Outcomes
Intended Knowledge Outcomes
On completion of the module students will understand:
- how the models covered can be used to critically evaluate the risks associated with a financial institution’s investment positions
- the main limitations of the risk models analysed in the module
- the role that financial regulators have in ensuring that risk models are properly implemented by financial institutions
- the importance of risk models in newly proposed financial regulation following the 2008-2009 global financial crisis.
Intended Skill Outcomes
On completion of the module students will have the skills required to:
- identify the presence of interest rate risk, credit risk and market risk for financial institutions from real-world data on their assets and liabilities
- quantify the risks identified using mathematics and/or statistics
- implement optimal strategies for minimizing these risks.
Teaching Methods
Teaching Activities
Category | Activity | Number | Length | Student Hours | Comment |
---|---|---|---|---|---|
Scheduled Learning And Teaching Activities | Lecture | 7 | 2:00 | 14:00 | PIP lectures |
Guided Independent Study | Assessment preparation and completion | 30 | 1:00 | 30:00 | N/A |
Guided Independent Study | Directed research and reading | 33 | 1:00 | 33:00 | N/A |
Scheduled Learning And Teaching Activities | Small group teaching | 3 | 1:00 | 3:00 | PIP seminars |
Guided Independent Study | Independent study | 1 | 20:00 | 20:00 | N/A |
Total | 100:00 |
Teaching Rationale And Relationship
• Lectures provide the basic structure of the methods and theories that are introduced and an overview of the current issues.
• Seminars provide an opportunity to enhance understanding of the empirical methods and the theoretical aspects of the module.
Reading Lists
Assessment Methods
The format of resits will be determined by the Board of Examiners
Exams
Description | Length | Semester | When Set | Percentage | Comment |
---|---|---|---|---|---|
Written Examination | 90 | 2 | A | 100 | Alternative mode of assessment if required: take home exam (24 hour) |
Formative Assessments
Formative Assessment is an assessment which develops your skills in being assessed, allows for you to receive feedback, and prepares you for being assessed. However, it does not count to your final mark.
Description | Semester | When Set | Comment |
---|---|---|---|
Prob solv exercises | 2 | M | Quiz in lectures |
Assessment Rationale And Relationship
The examination tests students' understanding of risk modelling in finance.
In the case of an alternative mode of semester 2 assessment being necessary because of a deterioration in the public health situation, a take home exam will be used (24-hour).
Timetable
- Timetable Website: www.ncl.ac.uk/timetable/
- NBS8201's Timetable
Past Exam Papers
- Exam Papers Online : www.ncl.ac.uk/exam.papers/
- NBS8201's past Exam Papers
General Notes
N/A
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Disclaimer
The information contained within the Module Catalogue relates to the 2024 academic year.
In accordance with University Terms and Conditions, the University makes all reasonable efforts to deliver the modules as described.
Modules may be amended on an annual basis to take account of changing staff expertise, developments in the discipline, the requirements of external bodies and partners, and student feedback. Module information for the 2025/26 entry will be published here in early-April 2025. Queries about information in the Module Catalogue should in the first instance be addressed to your School Office.