This unit provides the basic knowledge and tools needed to understand and manage risk. It includes business cases to illustrate the nature of risk and risk management strategies. The main focus is on quantitative approaches to analysing risk through understanding the probability distributions involved. Topics covered include: Value at Risk calculations; Utility theory for decisions; Prospect theory for decisions under risk; Extreme value theory; Monte-Carlo simulation; Stochastic optimization; Robust optimization; Credit scoring; Real options.
1x 2hr class per week plus 1 x 1hr tutorial
measuring risk assignment (15%); mid-semester exam (25%); stochastic optimisation assignment (15%); final exam (45%)
Knowledge of basic probability theory and familiarity with spreadsheet modelling
ECMT5001 or QBUS5001