ICM207: Market Risk

Module code: ICM207

Module provider: ICMA Centre; Henley Business School

Credits: 20

Level: 7

When you'll be taught: Semester 2

Module convenor: Professor Emese Lazar, email: e.lazar@icmacentre.ac.uk

Pre-requisite module(s):

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded:

Placement information: Na

Academic year: 2024/5

Available to visiting students: No

Talis reading list: No

Last updated: 19 November 2024

Overview

Module aims and purpose

This module provides an understanding of the Value-at-Risk (VaR) and Expected Shortfall (ES) framework for market risk assessment and control. The aims of the module are: (1) to cover the main methodologies of measuring market risk (mostly VaR and ES models); (2) to present and discuss the applications of these models to equity & FX, interest rate-sensitive products and derivatives markets;  (3) to introduce students to the relevant regulations (Basel & FRTB) regarding bank capital calculation for the trading book and (4) to provide students an opportunity to improve their communication and career skills related to market risk roles. The students will learn about the various methodologies to measure the market risk of portfolios and will benefit from the significant practical component of the module, based on computer-room workshops that support the lecture material.

Module learning outcomes

By the end of the module, it is expected that students will be able to: 

1. Outline the foundations of market risk analysis and the basic models for assessing market risk.  
2. Apply the market risk measurement techniques that are used daily in the front and middle offices of banks.  
3. Design Value-at-Risk (VaR) and Expected Shortfall (ES) model implementations for market risk in various markets. 
4. Demonstrate confident and credible communication skills.

Module content

1. The characteristics of markets and market risk 
2. Capital requirements 
3. Risk models 
4. Advanced Risk models 
5. Applications to Equities 
6. Applications to Foreign exchange 
7. Applications to Interest rate products 
8. Applications to Derivatives 
9. Applications to Fund management, banking & non-financial firms 
10. Fundamental Review of the Trading Book 
11. Communication and career skills in market risk roles 

Structure

Teaching and learning methods

Lectures are used to introduce the concepts covered in this module. The practical workshops allow students to discuss the topics in more detail, consider applications, build specially designed Excel spreadsheets, and receive feedback. In-person teaching will be supplemented with digital learning such as discussion boards, polling and video recordings.

Study hours

At least 30 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

In order to pass, students need to obtain a mark of 50% or more.

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: /cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Peer feedback on project outline. 

Feedback from workshop discussions. 

Reassessment

Additional costs