• Based upon the knowledge of Module M1 (Financial Market Decisions) about stock market,currencies and interest rates, students obtain a more detailed understanding of mathematical models for the behavior of standard financial derivatives (futures, options,
  swaps).
• Modern approaches to model financial risk are derived and discussed
• Students apply the acquired knowledge to empirically test the models in the faculty’s Finance & Research Lab.
• They learn how to analyze structured financial products
• They understand how financial institutions (banks, insurance companies, funds) manage financial risk and critically reflect the shortcomings of the models discussed in class.

• Introduction to financial institutions (banks, insurance companies and pension plans, mutual
  funds and hedge funds)
• Financial instruments (including non-traditional derivatives, exotic options and structured
  products)
• How traders manage their exposure
• Market Value at Risk
• Volatility
• Correlation and Copulas
• Interest Rate Risk (including duration and convexity)
• Credit Risk and Credit VaR
• Asset Backed Securities and Credit Default Options
• Overview: Operational Risk and Liquidity Risk
• Critical discussion: Model Risk and mistakes to avoid

• Lecture including small case studies
• Questions for discussion/practical problems (as homework assignments)
• “Semester project” organized in small groups

• Hull, Risk Management and Financial Institutions, 3rd ed., Wiley 2012 (required reading)
• Hull, Options, Futures and Other Derivatives, 8th ed., Prentice Hall International 2011
• Recent scientific papers and news reports to be provided in class

4 ECTS x 30 hours = 120 hours,  combined out of the following:

• Course attendance: 6 weeks* 3 hours = 18 hours
• Preparation / homework / self-study : 6 weeks* 3 hours = 18 hours
• Time for exercises and group work: 12 weeks* 1.5 hours = 18 hours
• Semester project / presentation:
  • 40 hours for scientific work
  • 10 hours for presentations

• Exam preparation: 16 hours
• Exam time: 120 minutes

Prerequirement for the exam
•Homework presentation (at least once)
•All students have to work on a semester project. As a prerequisite for the exam, studentshave to hand in a 20 page scientific paper and present their topic in a 20 minutepresentation plus 10 minutes discussion.

Exam requirements
• Pocket calculator
• No other material allowed in the exam(„closed book“)
• Semester project and final exam arecombined into one grade.
   They don’thave to be passed separately.

Weighting in examination
Final grade:
• 50% written exam
• 25% scientific paper from semesterproject
• 25% presentation