Objectifs

The aim of the course is to address asset and risk management issues using available econometric tools. We will start with the problem of the estimation error in asset management. Given the estimation error surrounding the forecasting of expected returns and the covariance matrix, the mean-variance criterion is also known as an “estimation-error maximizer.” We will study techniques proposed to deal with this issue. Then, we will move to risk management. We will define precisely the risk measures and their practical estimation for the main classes of risk. The class will offer a balance between academic knowledge and hand-on applications, in line with real life situations.

Contenus

We aim at treating the following topics. However, given the available time, not all topics may be covered:

Asset Management

1. General Problem of Asset Management
2. Strategic and Tactical Asset Allocation
3. Estimation Error in Asset Allocation
4. Factor Models and Shrinkage Estimation
5. Bayesian Analysis and Black and Litterman Approach
6. Risk Budgeting and Parametric Weights

Risk Management

7. Basic Concepts of Risk Management
8. Credit Risk Estimating Market Risk
9. Standard Measures of Market Risk
10. Advanced Measures of Market Risk
11. Operational and Liquidity Risks
12. Regulation and Systemic Risk

Références

Brandt M. (2010), Portfolio Choice Problems, in Y. Aït-Sahalia and L.P. Hansen (ed.), Handbook of Financial Econometrics, Vol 1: Tools and Techniques, 269-336.

McNeil A.J., R. Frey, and P. Embrechts (2005), Quantitative Risk Management: Concepts, Techniques, and Tools, Princeton University Press. Advanced textbook for the second part of the course.

Scherer B. (2007), Portfolio Construction and Risk Budgeting, Risk Books. Covers topics in the first part of the course.

Pré-requis

Data Science for Finance

Evaluation

1ère tentative

Examen:

Sans examen (cf. modalités)  

Evaluation:

The evaluation of the course is based on 2 projects, one in Asset management, one in Risk management. They typically consist in the implementation and extension of the techniques studied in the course. The projects will include some empirical work.

The overall grade will be given by the simple average of the grades of the 2 projects.

Rattrapage

Examen:

Sans examen (cf. modalités)  

Evaluation:

The evaluation of the course is based on the 2 projects in Asset management and Risk management. The students will have to work again on the projects.

The overall grade will be given by the simple average of the grades of the 2 projects.