Financial Risk Analysis

Course leader:  Abderezak Ali Abdurehman

Home Institution: Instituto Politécnico do Porto, Portugal

Course pre-requisite(s): A basic knowledge of financial assets, statistics and mathematics (calculus, linear algebra).

Course Overview

The Financial Risk Analysis course examines the available financial risk assessment techniques and practices. It proposes an assessment of market risk (related to movement in financial asset prices), liquidity risk (related to lack of marketability of an investment), credit risk (related to counterparties being unwilling or unable to fulfil their obligations), and operational risks (related to human or technical problems).

Learning Outcomes

By the end of the course participants will be equipped with an in-depth knowledge of the existing and most recent financial risk identification, and assessment techniques. This topic is essential for professionals who want to work in risk management, trading, hedge funds, treasury management, financial corporate strategy, as well as regulatory supervision of financial institutions. Risk assessment is also an important topic for the Chartered Financial Analyst certification organized by the CFA Institute. This course can also be viewed as a preparation for the Financial Risk Manager certification organized by GARP.

Course Content

The course includes the risk assessment techniques for various financial assets, such as equities, currency, commodities, bonds and other fixed income assets. Among others it will covers tools such as duration, bond immunization, portfolio beta, factor sensitivities, portfolio distribution analysis, principal component analysis, hedging using Greeks, stress testing, and value at risk (VaR).

Instructional Method

The course will be practical. Classes will involve lectures and projects. During lectures students will lean the theoretical aspects. In projects, students will do risk analysis of bonds, stocks and other financial assets using actual data on excel, Matlab, and related software.

Required Course Materials

1. Carol, A. (Market Risk analysis), 2007, John Wiley. Vol 1, 2, 3 and 4
2. Jorion, P. (Value-at-Risk: The New Benchmark for Managing Financial Risk), 2006, McGraw-Hill.

1. Excel
2. Econometric software: Matlab, E-views, Win Rats


Students will be assessed on three parameters; test, assignment and project. The test and class participation will cover 20%. Assignments will carry 30% and will be evaluated on basis of data analysis performed as a group in the class. The final project will contain 50% and requires students to prepare a full scale financial risk analysis on a project.