student handbook (provisional) · structured trade finance and fundamentals of commodity markets...
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MSc Mathematical Finance
2019/20
Student Handbook (provisional)
Birkbeck College
Department of Economics, Mathematics & Statistics
www.bbk.ac.uk/ems
Introduction
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INTRODUCTION
This Handbook is a ‘Users’ Manual’ for your academic programme. It describes the structure of your programme, what resources are available, and how to seek help when you need it. It directs you to the various resources on the Department website (www.ems.bbk.ac.uk) and the College website (www.bbk.ac.uk).
People, and how to reach them The Programme Administrator handles all administrative aspects of the Programme, and is usually the first point of contact for students.
Jo Kwok ([email protected]) Maternity Cover: Julia Bernhardt ([email protected]) Room: 720 Malet St Tel: 020 7631 6429
The Course Lecturers are in charge of academic issues specific to any lecture course, and first point of contact if you need any clarifications or help with the material covered in lectures. The easiest way to initiate contact with your lecturers is via email. The email address of faculty members is on the Department website, and is usually of the form: [email protected]
The Programme Director is in charge of the academic content of the programme. The Programme Director is the best person to contact if your academic difficulty relates to multiple courses. It is quite helpful to keep us informed of any issues or circumstances (health-related, work-related pressures, etc.) that might affect your performance or continuation on the programme.
Brad Baxter [email protected]
Personal Tutors are members of academic staff who can serve as an alternative point of contact. You can talk to your tutor about things like, choice of modules and options on your course of study, difficulties meeting deadlines, and problems outside of Birkbeck that may affect your progress on the programme. To find out who your personal tutor is, check your MyBirkbeck page.
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Information Technology (IT) Resources
Department IT Resources
The Department has its own Workstation Room, Room 742, for software specific to economics and finance.
The Department Student Help Desk
Awuku Danso (room 758; tel 020 7631 6433). Email: [email protected] at the following times
Term: Mon – Fri 16.00 – 18.00 Vacations: Mon – Thurs 16.00 – 18.00
College IT Resources
Workstation Rooms
For more general software, the College IT Service manages multiple Workstation rooms in various parts to the College. These include
College Main Building: Rooms 402, 412, 413, 422, 423 and 536;
Gordon Square: Rooms 10 and 11, 43
College IT Services Reception/ Help Desk
Ground floor, College Main Building, telephone 020 7631 6543
Term: Mon – Fri 09.00 – 20.00 Vacations: Mon – Fri 09.00 – 18.00
Learning Co-ordinator Eva Szatmari Room: 715a Malet Street Tel: 0207 631 6254 email: [email protected]
Eva's role is to support students in their studies. She is available 4 days a week to meet with students and to discuss their needs. She can offer advice on a variety of maths skills, including:
Pre-Algebra Formulae Equations Functions Basic calculus Basic statistics Basic data analysis
Introduction
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Calendar
For term dates see the College Calendar at www.bbk.ac.uk/about-us/term-dates
Significant Dates in the Academic Calendar*
Quantitative Techniques Lectures and Tests
September
Final examination for some Autumn Term courses
January
Deadline for submission of proposal for Econometrics project
January
Deadline for submission of Econometrics project
May
Final Examinations May - June
Dissertation submission deadline
September
*Specific dates for submission deadlines are posted on Moodle. Exam dates are posted on your My Birkbeck Profile.
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Programme Structure
Throughout, the material is approached in a rigorous fashion. Having completed the programme, students have a solid grasp of a broad sweep of advanced applicable finance and are ready to work as quantitative analysts in financial markets or to study for a doctorate. Lectures are held between 6 and 9 in the evening. In addition to lectures, some courses involve classes. These provide opportunities to review material related to the lectures and to discuss solutions to problem sets. For full-time students, classes are sometimes held in the afternoon. Classes for part-time students are always in the evening.
The structure of the degree is as follows. Students complete three compulsory courses and one option course, which are assessed through examinations in June. For some courses, problem sets also count towards the final grade. Full-time (FT) students are normally expected to complete the programme in one academic year, while part-time (PT) students normally take two years. Following their successful completion of four courses, students also complete a dissertation on a subject related to material covered in the programme. This dissertation has the same weight as one course in the final evaluation of a student’s performance.
Modules, Provisional Terms & Days
Performance in individual courses depends on a combination of end-of-year exams and continuous assessment: the latter may take the form of in-class tests and or take-home assignments. Please note that the below schedule is provisional, and are subject to change.
All students must take Quantitative Techniques and Mathematical and Numerical Methods. FT and PT first year students will almost always take Pricing, whilst PT second year students will then usually take Financial Econometrics 1, Forecasting, Credit Risk and Market Risk. However, other options are possible and should be discussed with the Programme Director.
1. Quantitative Techniques - 30 credits 2. Mathematical and Numerical Methods - 30 credits 3. [Pricing 1] Mathematics of Financial with Derivatives (option) - 15 credits 4. [Pricing 2] Derivatives Across Asset Classes (option) – 15 credits 5. Econometrics (option) – 30 credits 6. Econometrics of Financial Markets (option) – 30 credits 7. Credit Risk Management (option) – 15 credits 8. Market Risk Management (option) – 15 credits 9. Structured Trade Finance and Fundamentals of Commodity Markets (option) – 15
credits 10. Forecasting Economic and Financial Time Series (option) – 15 credits 11. Dissertation - 30 credits
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FULL TIME SEPTEMBER Quantitative Techniques (Mathematics and Statistics, (30 credits) AUTUMN TERM Mathematical and Numerical Methods (30 credits, 20 weeks) Option Econometrics (30 credits) Econometrics of Financial Markets (30 credits) Mathematics of Financial with Derivatives (Pricing 1, 15 credits) Market Risk (15 Credits) SPRING TERM Option Econometrics (30 credits) Econometrics of Financial Markets (30 credits) Derivatives Across Asset Classes (Pricing 2, 15 credits) Credit Risk (15 Credits) Structured Trade Finance and Fundamentals of Commodity Markets (15 credits) Forecasting Economic and Financial Time Series (15 credits) SUMMER TERM Dissertation (30 Credits)
PART TIME YEAR 1 SEPTEMBER Quantitative Techniques (Mathematics) AUTUMN TERM Mathematical and Numerical Methods (30 credits, 20 weeks) Option Mathematics of Financial with Derivatives (Pricing 1, 15 credits) SPRING TERM Option Derivatives Across Asset Classes (Pricing 2, 15 credits)
PART TIME YEAR 2 SEPTEMBER Quantitative Techniques (Statistics) AUTUMN TERM Option Econometrics (30 credits) Econometrics of Financial Markets (30 credits) Market Risk (15 Credits) SPRING TERM Option Econometrics (30 credits) Econometrics of Financial Markets (30 credits) Credit Risk (15 Credits) Structured Trade Finance and Fundamentals of Commodity Markets (15 credits) Forecasting Economic and Financial Time Series (15 credits) SUMMER TERM Dissertation (30 Credits)
For further information about the Exam and Assessment procedures at Birkbeck, please use the following link: http://www.bbk.ac.uk/mybirkbeck/services/administration/assessment
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Timetables
To view your course timetable, please login to your My Birkbeck Profile, or use the following link: http://www.bbk.ac.uk/ems/for_students/msc-mathematical-finance-1
Degree Classification
For those who complete the requirements for the award of an MSc, the award is classified as one of the following: Distinction, Merit or Pass. The classification is based on the Common Awards Scheme (CAS), whose details are at: http://www.bbk.ac.uk/registry/policies/regulations.
Results
The Assessment is overseen by a Board of Examiners, which meets in July. After the meeting, the Examiners usually give each student an indication of their likely degree classification (that is Distinction, Merit, Pass or Fail), conditional on successful completion of the Dissertation. University Regulations do not allow us to reveal the precise marks at this stage. These are notified routinely by the College in late Autumn. Information about the publication of results can be found at: www.bbk.ac.uk/mybirkbeck/services/administration/assessment/exams/results.
Teaching and Learning
Our MSc programmes are quite challenging. The primary method of teaching involves lectures, typically held between 6pm and 9 pm in the evening. These are supplemented with problem-solving classes (mostly in the evening too, but sometimes in the afternoons for full-time students) that allow you to reinforce the principles and techniques covered in lectures. Attending lectures and classes is a requirement of the programme.
As an experiment, we sometimes create a video archive of lectures to serve as revision tool. Where we succeed, this creates a useful resource for revision, but the quality is poor, and recording is not guaranteed. For many courses, we do not have any video recordings at all. And regardless of the availability of archived recordings, you are expected to attend all lectures and classes. See in particular, Birkbeck’s Attendance Framework.
We monitor classroom attendance electronically, through card readers in the classroom. You should tap your ID card on the reader for every class you attend. It is accepted that through illness or exceptional pressure at home or at work you may have to miss occasional classes, but if you have to be absent from several classes, or you know that you are going to have difficulties in attending regularly, please inform your Programme Director. For more information about the Birkbeck eRegisters system see: www.bbk.ac.uk/eregisters.
Private study and independent research are crucial – this involves independent reading of texts and journal articles, working through problems and exercises, completing assignments, revising for examinations. Students must devote enough time each week to keeping up with the programme.
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Feedback on your work
Feedback on your assessed work can help you in the learning process. Typically we are able to provide a lot of feedback on your coursework, while feedback on the final examinations is more limited, especially as results for these are provisional till they are confirmed by the Examination Board that meets in July. The precise details differ across modules, but here are the general principles.
Coursework may take the form of in-class tests and/or take-home assignments: typically we are able to report your provisional mark, provide model solutions where possible, and offer some comments on your work. You are invited to approach the lecturer for more detailed feedback.
For final examinations, we try to provide an indication of your results as soon as possible. For exams conducted in January, such quick feedback gives you only coarse results: the likely class of your performance (Distinction/Merit / Pass / Fail) rather than a precise mark; once the Exam Board has met in July, you get access to a precise mark.
Final examinations are double marked and the agreed mark is confirmed by the Exam Board. It is not possible to get access to your examination scripts or obtain a detailed breakdown of marks or feedback on your examination script. But you do have access to a College Appeals process
Examination Schedule
Final examinations are run by the College, which is also responsible for setting the examination schedule. Please note that final examinations usually take place in the morning or afternoon, so you may have to arrange leave from work to make these exams.
There is a set of examinations in early January. Likely dates for these are known in mid-September and confirmed in October.
The remaining examinations are held in a tight window from late May to early June. Detailed schedules for these are announced in March.
Examinations for the MSc Economics / Financial Economics programmes are run on an annual cycle. If you miss an examination for whatever reason, the earliest you can attempt the examination is 12 months later.
Failure and Re-assessment
Inevitably some students fall short of the challenge. College regulations allow the Board of Examiners to offer students a second attempt at a module that they have not passed. This second attempt may take one of the following forms:
Re-take for modules where a student obtained less than 40% at first attempt. In this case the student will be required to re-enrol on the module, attend lectures and classes and retake all the assessment associated with that module. Students re-taking a module will be charged for that module.
Re-assessment for modules where a student obtained between 40% and 49% on the first attempt. The student is not required to attend lectures and will only need to re-
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attempt any failed element of that module (in most cases, the examination). The re-assessed mark will be capped at a pass (50%).
The earliest you can retake or seek re-assessment is the subsequent academic year. The content of courses evolves from one year to the next, and it is your responsibility to keep track of any variations in the material. If you require further guidance about re-assessments, please contact the Programme Director.
Please note students cannot seek reassessment purely to improve their performance in a module that they have already passed.
For further information about the Exam and Assessment procedures at Birkbeck, please see: http://www.bbk.ac.uk/mybirkbeck/services/administration/assessment.
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College Policies and Resources
Your enrolment in the programme is governed by a detailed set of College Policies. For details see www.bbk.ac.uk/registry/policies/policies-1.
There is a set of examinations in early January. Likely dates for these are known in mid-September and confirmed in October.
The remaining examinations are held in a tight window from late May to early June. Detailed schedules for these are announced in March.
Examinations for the MSc Economics / Financial Economics programmes are run on an annual cycle. If you miss an examination for whatever reason, the earliest you can attempt the examination is 12 months later.
Mitigating Circumstances
Mitigating Circumstances are defined as unforeseen circumstances or circumstances that are outside the student’s control, and that significantly disrupt the student’s performance in assessment. The College alllows us to make allowances for mitigating circumstances, but please note that we impose these policies rather strictly, especially as the programme timeline permits very little slippag. Details at www.bbk.ac.uk/registry/policies/documents/MitCircs.pdf
Learning Resources
Birkbeck Library (www.bbk.ac.uk/library/) The Library provides a wide range of resources to help you succeed in your studies. It is vital that you make good use for the library’s physical and online resources throughout your time at Birkbeck. You will receive an induction to the library as part of the programme, and your subject librarian is available to give you more details of how to find the resources that you need. Moodle (moodle.bbk.ac.uk)
Moodle is the College’s Virtual Learning platform, to support taught courses through online provision of material. You access these resources using your ITS credentials to log in. My Birkbeck
My Birkbeck is your online account. Sign-in regularly to see your timetable and find other relevant details. You can also track the modules you are enrolled on, see your assessment results and view your attendance data. You can also get access to software and additional resources such as LinkedIn Learning.
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Academic Integrity and Assessment Offences
Demonstrating academic integrity is essential. We expect your submissions to be your own, original work, and free from plagiarism. Where you draw on the work of others you must acknowledge the source correctly according to academic referencing conventions.
Failing to demonstrate integrity in relation to your academic studies is called an assessment offence. The College takes any instance of an alleged assessment offence very seriously and has an Assessment Offences Policy that explains what will happen if we suspect you have committed an assessment offence. There are various types of assessment offence, of which plagiarism is one and arguably the most well-known form. Plagiarism is defined as the presentation of another person's thoughts or words or artefacts or other output in such a way that they could be assumed to be your own. It represents a serious issue in education that impacts on academic standards and undermines the integrity of education, so it is important that it is understood and avoided. The College has a set of plagiarism guidelines, developed for departments by Birkbeck Registry, which are intended to explain what plagiarism is, and how you can avoid it.
Other types of assessment offence relating to coursework include collusion and contract cheating. Collusion is defined as producing a piece of work for formal assessment with the assistance of another person, or persons, when the assignment was to have been undertaken and completed by you working individually. This includes cases where two or more students submit work for assessment that is identical in its entirety or in substantial parts. Contract cheating refers to the submission of work for assessment in part or in entirety using one or more of a range of services provided by a third party. This is prohibited by the College and includes the use of ‘essay mills’, which commonly take the form of a company or individual that promotes themselves and receives orders via a website and charges a fee to students for completing an assignment or assignments, sometimes disguised as proofreading and copyediting services.
In the case of examinations, any action that could give you an unfair advantage over other students in an examination setting is defined as an examination offence. Examples of examination offences can include, but are not limited to:
• Taking unauthorised material into the examination room; • Possessing electronic devices, such as mobile phones and smart watches, on
your person when in the examination room; • Hiding unauthorised materials in places outside of the examination room; • Removing examination scripts from the examination room; • Communicating with other candidates during the examination; • Copying work from other candidates during the examination; • Assuming a false identity in the examination room; • Adding or amending to examination scripts after the official end of the
examination.
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Student Voice
At Birkbeck we take our students’ opinions and feedback seriously. Receiving student feedback helps us develop our provision and work with students to improve students’ experience of studying with us.
For each course, we collect anonoymous, end-of-term feedback. We invite students to tell us about their experience at Birkbeck in a variety of ways including module evaluation. We invite students to take part in termly Student-Staff Liaison meetings, to gauge your reaction to our teaching and to find ways to improve. report, or an action plan to implement changes or improvments. We want to hear your honest feedback, both positive and negative, so that it can inform our practice and ensure you have the best possible experience. Not all student feedback can be actioned. There are sound pedagogical reasons for our approaches to delivering lectures and assignments. Other things we would like to do but are constrained. Where we choose not to, or cannot act on feedback, we will explain the reasons why, and are happy to discuss these with you.
Other College Resources
Student Support and Wellbeing bbk.ac.uk/student-services
Birkbeck offers a comprehensive range of student support services.
Ask cis.bbk.ac.uk/apex/a02u/f?p=104:101
Use the College system to make a query and track the responses.
Student Advice www.bbk.ac.uk/student-services/student-advice-service
Call us first if you have any queries about studying at Birkbeck, or if you do not know who to contact. Visit us or use the self-service terminals located in the Student Advice Service in the Birkbeck main building on Torrington Square. Turn left when you enter the via the main entrance.
Careers Service www.bbk.ac.uk/student-services/careers-service/
Our Careers and Employability Service is free and available to all Birkbeck students and recent graduates, to enhance your career development and employability.
Birkbeck Talent www.bbk.ac.uk/student-services/birkbeck-talent-service/
Birkbeck Talent is Birkbeck's own professional recruitment service linking students and recent graduates with top UK employers, allowing you to gain valuable workplace experience in the day and study in the evening.
Childcare Services www.bbk.ac.uk/student-services/childcare-services
We offer an affordable evening nursery service for children aged two to six years.
Counselling Service www.bbk.ac.uk/student-services/counselling-service
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We offer a range of services: one off appointments to talk something through, short-term counselling, self-help resources and wellbeing courses.
Disability & Dyslexia www.bbk.ac.uk/student-services/disability-service
We welcome students with disabilities and we are committed to helping you seize the opportunities that studying here presents. Regardless of your condition, we are here to support you during your studies.
Equality and Diversity www.bbk.ac.uk/about-us/equality
Birkbeck is proud of its diversity and recognises the value that this brings to College life. The College embraces and celebrates the differences between people, recognising the strengths and benefits of a diverse, inclusive society, workforce and student body.
Graduation www.bbk.ac.uk/student-services/bbk-graduation/
Birkbeck Graduation is all about celebrating your achievements. Ceremonies are held twice a year, in April and November, at historic Senate House in Bloomsbury - the heart of academic London.
Mental Health www.bbk.ac.uk/student-services/mental-health-advisory-service
Whether you are experiencing short- or long-term mental health difficulties during your time at Birkbeck, we are your first point of contact. We offer a confidential, impartial and non-judgemental service for students.
International students www.bbk.ac.uk/international/working-graduates
Tier 4 (General) Student visa permits students to work while studying in the UK. You must ensure that you follow the restrictions that are stated in your visa.
ITS Service Desk www.bbk.ac.uk/its/helpdesk_team
The ITS Service desk team members provide users with a primary point of contact for enquiries regarding ITS staff and services. Tel: 020 7631 6543; Email: [email protected]
Students Union www.birkbeckunion.org
Birkbeck Students' Union seeks to provide opportunities, guidance, and events to enhance your student experience.
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MSc Mathematical Finance Course Units
Quantitative Techniques (compulsory)
Compulsory module (30 credits) for Full-Time, Part-Time 1 and Part-Time 2
COURSE AIMS AND OBJECTIVES
This course reviews the core mathematical and statistical tools essential for the MSc programme. On completing the course, you should be able to:
use matrices for algebraic manipulations; use the techniques of static and dynamic optimization; compute definite and indefinite integrals; solve simple difference and differential equations; and understand the basic of probability distributions and statistical inference
COURSE PRE-REQUISITES: none
TEACHING ARRANGEMENTS AND ASSESSMENT
The course is taught as two sub-modules. Part-time students
cover basic mathematics in their first year, in September review statistical techniques, in their second year, in September
Full-time students cover all elements in one year.
COURSE ASSESSMENT
Performance in these modules is assessed through in-class examination in September. You MUST pass the September examinations in order to proceed to the MSc programme, but as long as you pass the mark for this course is ignored for computing the average percentage for the MSc Programme.
TEXTBOOKS
Lecture notes are provided but most students find it helpful to use a textbook to supplement these. We do not recommend any particular text, but in the past students have found the following useful.
Chiang, AC and K Wainwright, Fundamental Methods of Mathematical Economics, 3rd ed., McGraw-Hill.
Greene, WH, Econometric Analysis, 7th ed., Pearson, 2011.
Hogg, R V, Introduction to Mathematical Statistics, Prentice-Hall 1995
Rice, J. (2006). Mathematical Statistics and Data Analysis, 3rd. ed., Cengage.
Wackerley D., Mendenhall, W. and Schaerer, R. (2008) Mathematical Statistics with Applications, 7th ed., Cengage
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Mathematical and Numerical Methods (compulsory)
EMMS011S7
Full-time and Part-time 1 Autumn and Spring Terms, over 20 weeks Lecturer: Brad Baxter
Aims
To introduce students to the main mathematical and numerical techniques used in quantitative finance. The course is divided into three sub-modules and illustrated by examples drawn from this subject area.
[MSc Mathematical Finance and sibling degrees only] To become acquainted with suitable languages and computer packages for financial applications (C++ and Matlab).
Objectives a) Stochastic Processes for Finance
To understand the basic concepts of stochastic calculus, in particular Brownian motion and stochastic integrals.
To understand Ito calculus and its applications to stochastic differential equations (SDEs).
To understand the numerical solution of an SDE To appreciate the connections between probability theory and partial
differential equations via the Feynman-Kac formula.
b) Theoretical Numerical Methods for Finance To solve SDEs using Monte Carlo simulation. To understand the fundamental algorithms for the numerical solution of
parabolic partial differential equations (PDEs). To understand the binomial method for option pricing as a finite difference
method, particularly its disadvantages. To appreciate the importance of stability in numerical algorithms for PDEs. To understand numerical methods for the solution of nonlinear equations
and some basic optimization techniques. To know the basics of relevant numerical methods, eg data fitting. To illustrate the above by examples and exercises in Matlab.
c) Programming in C++ [MSc Mathematical Finance and sibling degrees only]
To understand the language fundamentals of C and C++. To use arrays, dynamic memory allocation and data input/output. To understand and construct classes, illustrated by classes for complex
numbers and matrix algebra. To use numerical libraries.
Course Assessment
Stochastic Processes (a) and Theoretical Numerical Methods (b) will be assessed via coursework (20%) and a three-hour examination in June (80%). Students are
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recommended to use their knowledge of Matlab and C++ in their final-year dissertation, where appropriate.
Textbooks
The courses will be based on extensive lecture notes.
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Pricing Option: Mathematics of Financial Derivatives and Derivatives across Asset Classes
Full-time and Part-time 1 Autumn and Spring Terms Lecturers: Simon Hubbert and Hélyette Geman
Part 1: Mathematics of Financial Derivatives (Pricing 1) BUEM052H7
The module aims at giving thorough understanding of the foundation of modern asset pricing theory. The module intends to introduce students to the state-of-the-art financial economics as it is used in financial research and business practice over the last 30 years. The course is essentially split into two sub-courses, one is taught by Simon Hubbert every Tuesday evening and the other is taught by David Schroeder every Wednesday evening.
Tuesday sub-course: The first half (weeks 1-5) focus on portfolio analysis and so covers the optimal portfolio problem and the consequent mathematical development of the famous Capital Asset Pricing Model (CAPM). We will explore the applicability of the CAPM to real world problems and also discuss its drawbacks. Motivated by the CAPM we will consider the multi-factor models for asset returns and examine their applicability. Numerical examples will be used to illustrate the theoretical development.
The second half (weeks 6-11) focus on derivative pricing and so covers the role of forwards, futures and options in the financial markets. The distinguishing properties of derivative products are highlighted and the concept of no-arbitrage is introduced. Under the assumption of no arbitrage, the valuation of financial derivatives is explored. Two directions are pursued, the derivation of the famous Black-Scholes-Merton partial differential equation and the use of binomial trees. As before, the theory is illuminated with numerical examples.
Assessment
The course is assessed through a two-hour test in January (80%) and coursework/in-class tests (20%).
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Part 2: Derivatives across Asset Classes (Pricing 2) BUEM086H7
Aims and Objectives: This module explains the concept of primitive assets and risk premium embedded in their price; the notion of complete markets; forwards and futures as linear derivatives and their central role in equities, FX and commodities. You will explore the famous Black-Scholes-Merton model using a change of probability measure, review fundamentals on interest rates and extend the major option pricing formulas to stochastic interest rates. You will also study interest rates - caps, floors, swaptions - and the fundamentals of international finance and the Garman-Kohlhagen formula. On successful completion of this module you will be expected to be able to:
understand advanced techniques related to derivatives
work in trading or sales activities of derivative instruments, as well as risk management and model validation.
Assessment
The course is assessed through a two-hour test in June (75%) and coursework (25%).
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Option: Econometrics
Full time and Part-time 2 (30 credits)
Autumn and Spring Terms
AIMS AND OBJECTIVES
This course provides an introduction to theoretical and applied econometrics. It emphasizes time-series methods in the first term, and cross-section and panel data methods in the second term. The course, especially the project, aims to help you in actually doing applied econometrics. This involves combining economic theory, statistical methods and an understanding of the data, with the ability to use the appropriate software and interpret the output.
At the end of the course students will be able to demonstrate that they can:
derive standard estimators (e.g. OLS, ML, IV) using matrix algebra and understand their properties
explain the basis for standard exact and asymptotic tests and use them in practice
develop and analyse basic univariate and multivariate time-series models for integrated and cointegrated data and know how to choose between alternative models
use standard econometrics packages and interpret their output read, understand and explain empirical articles in the literature.
COURSE PRE-REQUISITES: Quantitative Techniques (BUEM027S6)
ASSESSMENT
Two thirds of the marks come from exams held in January and June, and one third from an empirical project that must be submitted after Easter.
INDICATIVE READING
A course booklet will be distributed, which will contain a fuller reading list.
Marno Verbeek’s A guide to modern econometrics, 3rd edition, Wiley 2008, covers most of the material in the course at a similar level.
W. Greene, Econometric Analysis, 7th edition, Prentice Hall, 2012, provides a more extended treatment.
P. Kennedy, A Guide to Econometrics, 6th edition Blackwell 2008, is not a text-book, but provides an excellent explanation of what econometrics is about.
Angrist, J.D. and J.S. Pischke (2009): Mostly Harmless Econometrics, Princeton University Press provides an excellent explanation of micro-econometrics.
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Option: Econometrics of Financial Markets Full time and Part time 2 (30 credits) Autumn and Spring Terms
Module description
This course provides you with an introduction to applied financial econometrics, statistical methods and an understanding of the data. You will learn how to use the econometric software and interpret the output, and how to apply econometrics to financial problems.
Aims and learning objectives
By the end of this module, you should be able to:
understand the foundations of statistics, including probability distributions and descriptive statistics
derive the Ordinary Least Square (OLS) estimator and understand its properties
explain the basis for standard tests and use them in practice
develop and analyse basic univariate and multivariate time-series models for integrated and co-integrated data and know how to choose between alternative models
use standard econometrics packages and interpret their output
read, understand and explain empirical articles in academic literature
conduct and report on an independent piece of empirical research that uses econometric techniques.
Recommended reading
Barrow, M., Statistics for Economics, Accounting and Business Studies. Prentice Hall.
Brooks, C., Introductory Econometrics for Finance. Cambridge University Press.
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Option: Risk Management
Part 1: Market Risk Management
Course number: BUEM053H7 Full-Time and Part- Time Year 2 Autumn Credits: 15 Lecturer: Simon Hubbert and Ilaria Peri
Course Aims and Objectives
To demonstrate an understanding of the different reasons for (and approaches
to) measuring market risk. To gain a fundamental knowledge of the
mathematical and statistical theory behind the subject and to be able to apply
this to solve real-world problems.
On successful completion of this module a student will be expected to be able to:
measure financial losses;
demonstrate a sound theoretical knowledge of Value at Risk (VaR) and Tail Value at Risk (TVaR);
compute VaR and TVaR (under certain distributional assumptions) for a given portfolio of risky assets;
employ statistical tools to examine the stylized facts of asset returns;
build and use risk models featuring jumps and stochastic volatility;
demonstrate sound knowledge of the GARCH family of risk models and its applications;
compute VaR for derivative portfolios;
use extreme value theory applied to VaR and TVaR calculations;
measure risk using simulation methods;
statistically evaluate a given risk model using back-testing techniques.
Outline of topics
The course will focus on the following topics:
Properties of financial time series
Value at Risk and related measures for portfolios of standard assets
Risk factor models – strengths and weaknesses
Value at Risk for derivative portfolios
Time series analysis for risk managers
Extreme Value Theory and its applications in finance.
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Course Assessment
The final grade is determined through a two-hour exam in June (80%) and a take-home exercise in the Christmas vacation (20%).
Recommended Texts
The core literature of the module consists of:
S. Hubbert, Essential Mathematics for Market Risk Management, Wiley Finance, 2012.
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Part 2: Credit Risk Management
Course number: BUEM051H7 Full-Time and Part-Time Year 2 Spring Term Credits: 15 Lecturers: Pedro Vergel
Course Aims and Objectives
A gross lack of understanding of the dangers of too much exposure to credit risk caused the recent and on-going financial crisis. As a result, the future of financial risk management will place a high weight upon the accurate measurement and understanding of credit risk. This module is designed to deliver the essential mathematical and statistical methods underpinning the management of credit risk.
On successful completion of this module a student will be expected to be able to:
demonstrate a sound knowledge of the essential mathematics of credit risk;
demonstrate an excellent working knowledge of the most commonly used models in credit risk management;
be able to price simple credit derivatives;
demonstrate a sound understanding of the most actively used credit products, such as credit default swaps (CDS) and credit valuation adjustments (CVA);
Outline of topics:
The course will focus on the following topics:
Essential Mathematics of Credit Risk – Stochastic processes and advanced
probability theory;
Well-known approaches toCredit Risk including the structural and
reduced form models;
Credit Default Swaps and Credit Value Adjustments.
Course Assessment:
2 hour examination in June (80% of the total marks) and course-work (20%).
Recommended Texts:
A J McNeil, R Frey and P Embrechts – Quantitative Risk Management.
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Structured Trade Finance and Fundamentals of Commodity Markets (OPTION) EMEC054S7 Full-time and Part-time Year 2 Spring Term Credits: 15 Lecturers: Hélyette Geman Course Aims and Objectives The first part of the course aims to provide an understanding of world global trade, the supply chain of commodities and raw materials from production to consumption, and the shipping fundamentals - dry bulk versus ‘liquid’ tankers, freight indexes and forward contracts. The second part describes the role of supply/demand in commodity spot markets, the role of inventory and its relation to commodity price volatility. The mechanisms of futures contracts and exchanges’ clearing processes are discussed, as well as the rules of margining and collateral posting. Lastly, the forward curve, its construction, the modelling of its dynamics and the financial economic information contained in its shape and level are deeply analysed and illustrated in the reference case of crude oil. On successful completion of this module you will be expected to be able to:
understand commodities, raw materials and production logistics.
understand the role of financial players, both as trade facilitators and trading entities.
master the first group of derivatives called forwards and futures in the asset class of commodities where they originated.
learn the lessons of margining and collateral applied by commodity exchanges for 160 years.
Outline
World International Trade and Logistics Shipping Markets and Financial Instruments Commodity Spot Markets Theory of Storage Inventory and Volatility Forward Contracts Exchanges and Margining Rules The Crucial Role of the Forward Curve The Dynamics of the Forward Curve: the Key Example of Crude Oil
Recommended Texts
H. Geman (2008) “Risk Management in Commodity Markets: From Shipping to Agriculturals and Metals”
H. Geman (2005) "Commodities and Commodity Derivatives: Agriculturals, Metals and Energy", Wiley Finance
Eydeland (2003) "Energy and Power Risk Management", Wiley FinanceD
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Forecasting Economic and Financial Time Series BUEM033H7 An optional module (15 credits) for Full-time and Part-time 2 Spring Term Lecturer: Ron Smith AIMS AND OBJECTIVES This module examines the principles and practice of making forecasts of economic and financial time series for decision making in government, business and economics more generally. Prior training in time-series econometrics is a pre-requisite. We will use EViews to build forecasting models and to make and assess forecasts. We sometimes invite professional forecasters to give the practical forecasting lectures. Students who complete the course should be able to:
use a range of models to to produce point, interval and density forecasts;
undertake both economic and statistical evaluation of point forecasts;
understand the role of judgment and the limitations of forecasts. COURSE PRE-REQUISITES: Statistics, and MSc-level course in time-series econometrics COURSE ASSESSMENT A two-hour examination. RECOMMENDED TEXTS
The technical level of the material in the option will be between Diebold, F.X. (2008), Elements of Forecasting, South Western. 4th edition,
(introductory)
Elliott G. and A. Timmermann (2016), Economic Forecasting, Princeton University Press (advanced)
Outline 1. Introduction to forecasting, loss functions and forecasting with regression models 2. Trends, deterministic and stochastic, cycles and seasonality. 3. AR, MA, ARIMA and VAR models. 4. Basic Bayes for forecasting, and Bayesian VARS. 5. Practical Forecasting I. 6. Forecast evaluation, 7. Factor Models and combining forecasts 8. Volatility modelling, ARCH and GARCH, Density forecasting. 9. Practical Forecasting II 10. Revision and round up: using economic models in forecasting.
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Dissertation
BUEM029S7 Full-time and Part-time 2 Spring and Summer term
Aims
The Dissertation requires students to apply the techniques and knowledge acquired from the taught courses. Students should:
show that they have a good knowledge of the relevant literature on their chosen topic;
identify an interesting question associated with that topic and analyse this question either in a new way or with new data;
demonstrate they have a good grasp of techniques (statistical, numerical or theoretical) relevant for analysing the question;
present the results of their analysis in a clear and convincing manner, within the word limit (6000 words)
Student must choose a suitable topic. Any subject that relates to material covered in the Programme is admissible, but it is generally sensible to stick to projects which contain some substantial element of statistical or numerical analysis. Theoretical projects are difficult although occasionally students have produced good work of this type. Purely institutional topics are not permitted.
On data, it is important not to be too ambitious. Often students spend inordinate amounts of time collecting large datasets and then find they have no time to perform analysis. Interesting analysis motivated by some genuine, substantive question earns high marks. Whatever is done, it is important that students time their work realistically. Aiming to complete the report in the last fortnight before the deadline is a recipe for trouble. If you are unfamiliar with econometric packages, everything takes longer than you expect. A good source of financial data is Datastream, which can be accessed using a computer in the Library. The principal databases cover equities, bonds, company accounts, economic series, international market indices, interest and exchange rates and financial and commodity futures and traded options
Schedule
Students must submit a one-page proposal by the end of week 6 in the Spring Term. This proposal should state the basic idea of the project, what data and computing facilities will be required and whether or not these are known to be available. Students are encouraged to contact lecturers in advance to discuss and refine their proposal.
The Department will then allocate a supervisor to guide your research. The choice of a supervisor depends on availability and interests of faculty members. Students should establish contact with their supervisors at an early stage, whether in person or via email to discuss supervision arrangements. An initial meeting to obtain advice on data, techniques and overall direction is valuable.
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Students should maintain contact with their supervisor (say by submitting a draft for comments and feedback). Ideally, this process should be completed by June.
July is for completing the research, and for writing up the Dissertation. Note that many supervisors are away in July and August, so communication via email alone may be possible. The final submission date is usually the last Friday in August.
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Employability
Careers and Employability Service
We provide comprehensive careers, recruitment and employability advice, events and information services for our students, both online and face-to-face at our dedicated support space on the Birkbeck campus in Bloomsbury. These include: speaking to a careers advisor; panel discussions with employers, Birkbeck alumni and careers consultants; workshops and events on finding work, CV and application writing, and preparing for interviews; and online social media support.
We also work closely with Birkbeck Talent, our in-house recruitment service, to provide bespoke support for student pursuing employment and internship opportunities.
To find out more, visit bbk.ac.uk/careers
Birkbeck Talent: a dedicated in-house recruitment service for students
Birkbeck Talent is a professional recruitment service aimed exclusively at assisting Birkbeck students to find work whilst studying and after graduation. We work with London’s top employers to offer innovative internships, prestigious job vacancies and exciting graduate opportunities.
To find out more, visit bbk.ac.uk/talent
Business Engagement Team
The School of Business, Economics and Informatics has a dedicated Business Engagement team where you can take advantage of extra support - in addition to what is offered by Birkbeck Talent and the Careers and Employability Service. Based in Malet Street, the team deliver a range of activities to support you in your career aspirations including:
Mentoring Pathways
Mentoring Pathways pairs successful applicants with industry professionals for individual advice and guidance. There are approximately 100 places available for final year under-graduates and post-graduate students. We have partnerships with a number of employers including Credit Suisse, PwC, University London College Hospital, Enfield Council, Hounslow Council and work alongside Birkbeck alumni, who are employed in a range of exciting and dynamic businesses.
Enterprise Pathways
Whether you are setting out in your journey as an entrepreneur or have already established a thriving business, we offer a range of initiatives to support you. These include workshops, access to digital resources, opportunities for networking, competitions and coaching.
Events
An events schedule can be found overleaf and our events will also be advertised through emails, the Business Engagement student newsletter and social media. These events will help you to find out more about industry sectors, entrepreneurs and professional bodies.
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To accommodate for busy lives and responsibilities at work, many of these events are filmed and later uploaded to our bespoke on demand video service, BEInspired.
Please visit our website www.bbk.ac.uk/business/business-services for resources and information about all of these initiatives.
Insiders’ Guides
We would like to take a small number of students to visit workplaces and ask questions about the culture, the roles and career progression. If your employer would like to participate, or you have a particular industry or sector that you would like included as part of this series, please contact us at [email protected] for further details. Look out for opportunities to be part of the student group via our newsletter and social media.
You can also follow BEI on social media for information and conversations:
• Twitter: @BirkbeckBEI
• Facebook: BirkbeckBEI
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