Economics: Financial Risk Management

In this course you will learn how financial institutions manage their credit and market risk. Credit risk refers to the risk in the loan portfolio and market risk is the risk of price changes in other assets, such as equity, that the financial institution owns.

You will assess how climate risk affects both credit and market risk. You will cover in depth the different statistical models that the industry uses and learn how to implement the models in the programming language Python. You will estimate the models using real data and then test how well they perform.

Since risk management in financial institutions is heavily influenced by regulation, you will also cover the Basel rules, which is the international framework for regulating bank capital requirements. Sometimes you will shift perspective from an individual institution to look at the risk in the whole financial system, so called systemic risk, and how that can be measured and managed from the perspectives both of a financial regulator and the individual institution.

Course syllabus

The syllabus contains the formal and legal details of the entire course. It’s a legal document outlining the course structure and requirements, intended mainly for administrative use.

Course literature

The course literature listed may be updated up to eight weeks before the course begins.

Teaching consists of pre-recorded lectures, in-class lectures as well as computer exercises. The pre-recorded lectures have associated recommended exercises. Typically, you will watch two pre-recorded lectures and do some reading before each in-class lecture.

During the in-class lectures, we start with a summary of the video lectures and then we open up for questions and discussion. We will spend about one third of the time on modelling and estimation using Python code and some time doing exercises and examples on the board. Each in-class lecture ends with about 10 minutes of questions based on the lecture that you answer and hand-in (not used for grading).

The examination has two parts: one written exam at the end of the course and a series of group exercises that consists of small empirical projects. 

Entry requirements

Students admitted to the Master Programme in Economics or the Master Programme in Finance are qualified for this course. For other students, at least 90 ECTS-credits in economics are required. These must include a course in basic financial economics, an intermediate course in microeconomics (e.g., NEKG21 "Intermediate Microeconomic Analysis"), and an intermediate course in econometrics (e.g., NEKG31 "Econometrics") or equivalent courses.

Selection criteria

Seats are allocated according to: ECTS (HPAV): 100 %.

Tuition fees for non-EU/EEA citizens

Citizens of countries outside:

• The European Union (EU)
• The European Economic Area (EEA) and
• Switzerland

are required to pay tuition fees. You pay an instalment of the tuition fee in advance of each
semester.

Tuition fees, payments and exemptions

Full programme/course tuition fee: SEK 18,750
First payment: SEK 18,750

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Note that you may also need to pay an application fee, or provide proof of exemption.

Application fee

No tuition fees for citizens of the EU, EEA and Switzerland

There are no tuition fees for citizens of the European Union (EU), the European Economic Area (EEA) and Switzerland.