MA (FIM) 549Financial Risk Analysis
Spring, 2017 T, Th 11:45am-1:00pmDAN371

1. Instructor:Tao Pang Office:SAS Hall 4116
Telephone:513-2110Email:
Office hours:Tu, Th 10:00am-11:00am or by appointment.

2. Prerequisites

  • Multivariable calculus (partial differentiation and multiple integration), the kind of material covered in NCSU’s math courses MA231 or MA242. Better would be advanced calculus.
  • Probability theory (such as MA421).
  • No economics or finance background is required, but you may need at least one course in basiceconomics (such as ECG201). Those of you enrolled in the Financial Mathematics programshould consider taking a course in microeconomic theory (such as ECG301) at some point to acquire more understanding of how financial markets work.

3. Textbooks:

Hull, John C., Risk Management and Financial Institutions, 4th Edition, Wiley, 2015. Required.

4. Outline of Course:

This course focuses on the ways in which risks are quantified and managed by financial institutions. First, we will introduce financial institutions (banks, insurance companies, mutual funds and hedge funds, etc.) and their risk management issues. The credit crisis of 2007 will be covered in this part, too. Secondly, we will focus on the market risk, including topics on interest risk, Value-at-Risk, volatility, correlations and copulas. Then we will consider credit risk, including default probability estimation, CVA, DVA and credit value at risk. If time permits, we will cover other topics, such as operational risk, liquidity risk, model risk, etc.

There will be several homework assignments consisting mostly or even entirely of questions taken fromthe Practice Questions and Problems section at the end of each chapter in the required textbook. The homework assignments are to provide practice in using the materialand to foster discussion of any questions or confusions you may have. The solutions can be found at the end of the textbook, so you can check your answers against the solutions.You won’t learn anything unless you try to work out the assigned questions before you consult the solutions. You are encouragedto do as many of them as possible outside class and then revise youranswers until you get the answers in the provided solutions. It is ok to work in groups so thatyou can discuss everything with your classmates. That usually is helpful for everybody.

5. Grade Policy

-Homework: 20%

-Exams: 80%

-No make-up exams unless there are emergencies during the regular exam times.

6. Attendance Policy
The attendance policy is consistent with the Academic Regulations which can be found at

7. Disability Services for Students
Student with a disability must contact the NCSU Disability Services.
Additional information: