Risk Theory and Risk Management

Module Title:
Risk Theory and Risk Management
Module Code:

Module Content

ntroduction to Risk, the Nature of Risks, Types of Risks, Management of Risk Risk models. Several models, probability and consequences of ruin, Cramer-Lundberg. Premium principles.Bayesian statistics, Credibility Theory.

Advanced Risk Models, including dynamic optimal reinsurance strategies. Mean-variance portfolio theory, Utility theory; risk aversion. Capital asset pricing model; discussion of the efficient market hypothesis. Risk measures, such as Value at Risk and Tail Value at Risk; properties of risk measures.

Multivariate models for market risk: aggregate risk, loss distributions; multivariate normal distributions and normal variance mixture distributions. Copulas: definition; Sklars theorem; Archimedean copulas; dependence

Credit risk management; types of model; Merton model; Markov chain model for credit ratings; exposure upon default; dependence between default events