Unit convenor and teaching staff |
Unit convenor and teaching staff
Lecturer
Luke Gower
Contact via Email
Sydney CBD
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Credit points |
Credit points
2
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Prerequisites |
Prerequisites
(Admission to MAppFin or GradDipAppFin) and ECFS868
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Corequisites |
Corequisites
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Co-badged status |
Co-badged status
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Unit description |
Unit description
Quantitative modelling is an essential part of modern finance yet models are often misinterpreted and misused. The aim of this unit is to build an understanding of modelling techniques for prices in liquid markets (currencies, commodities, equities). We consider techniques for analysing the distribution of possible prices over both short and medium term horizons. Applications will therefore include the risk analysis of short-term trading and investment portfolios as well as future cash flows for a project (in non-financial corporations). Model risk is a focus of this unit, helping students to appreciate the deficiencies of all models, to make appropriate model selections and to consider the ethical dimensions of price and risk modelling. You will improve your modelling abilities and also your capacity to communicate and interpret complex technical information.
Techniques include simulation analysis, mean reversion models, GARCH models (for changing volatility), analysis of correlation/co-movement and heavy-tailed distributions (for modelling extreme events). Case studies and computer workshops are used in class.
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Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates
On successful completion of this unit, you will be able to:
To pass this unit (requires a Mark of 50 or better) the student must pass the final examination.
Professional Risk Manager (PRM) Certification
A passing grade in this Unit is required for students to obtain exemptions in the PRM Certification. For further information about PRM certification please see:
https://www.mafc.mq.edu.au/about/education-partnerships/prmia-certification-program
Name | Weighting | Hurdle | Due |
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Assignment | 50% | No | Refer to iLearn |
Final Exam | 50% | Yes | Refer to Timetable |
Due: Refer to iLearn
Weighting: 50%
Summary of Assessment Task
Individual / Group: Individual
Due Date: Refer to the Unit's iLearn site
Grading Method: Refer to 'Standards Required to Complete the Unit Satisfactorily' section
Submission Method: Online via the Unit's iLearn site
Duration: Refer to Assignment Coversheet
Extension Requests:
Other Information:
Due: Refer to Timetable
Weighting: 50%
This is a hurdle assessment task (see assessment policy for more information on hurdle assessment tasks)
Summary of Assessment Task
Individual / Group: Individual
Due Date: Refer to Timetable. Assessments: Different Class Groups have different deadlines. Students should find the timetable and dates relevant to their group at www.mafc.mq.edu.au
Grading Method: Refer to 'Standards Required to Complete the Unit Satisfactorily' section
Submission Method: As per MAFC Program Rules & Procedures at www.mafc.mq.edu.au
Duration: 2 hours plus 10 minutes reading time
Examination Conditions:
Extension Requests:
Face-to-Face Teaching: Generally 20 hours
Timetable: Detailed timetable for classes are on the Centre’s web site www.mafc.mq.edu.au
Consultation Times:
Students who wish to contact any of the teaching staff may do so through:
Text: Nil
Additional Readings:
Lecture Notes: Available in printed form and electronically via iLearn.
Study Problems: Students are required to work systematically through suggested problem sets. These problems will not be collected but they will help you prepare for the exams. Answers to the problems are posted on iLearn.
Pre-Unit Materials: Information papers on statistics, regression, accounting and other material may be found at http://www.mafc.mq.edu.au/applications/minimum-knowledge-requirement/pre-course-materials1/. Students should work through this material prior to commencing the degree. The material will remain a useful reference as students progress through the program.
Computer Workshop:
Extension References:
The book has 3 parts: volatility and correlation analysis, modelling the market risk of portfolios, and statistical models for financial markets. It is a useful reference for quantitative analysts in the field of risk modelling, and comes with a CD-rom containing examples of models described in the text. The book has a useful website: www.wiley.co.uk/marketmodels
This Handbook contains study materials for those planning to attain certification through the Professional Risk Managers’ International Association. It can be purchased online at www.prmia.org. The chapters on linear algebra, numerical methods, VaR models (for market risk) are useful for this Unit.
Carol Alexander’s magnum opus! Volume I “Quantitative Methods in Finance” has chapters on linear algebra, probability and statistics, numerical methods, and basic calculus. Volume II “Practical Financial Econometrics” has chapters on GARCH modelling, principal component analysis etc. Volume III “Pricing, Hedging and Trading Financial Instruments” includes coverage of portfolio mapping and volatility modelling. Volume IV “Value-at-Risk Models” deals with historical simulation, Monte Carlo simulation, stress testing etc.
This book has excellent coverage of GARCH, simulation methods and a review of fundamental mathematical and statistical concepts. Also good discussion of software packages for econometric analysis in Chapter 1. Available as an eBook.
Very readable book with chapters on volatility modelling, simulation methods, backtesting and stress testing. Has accompanying CD-rom with Excel spreadsheets.
Covers both parametric and non-parametric methods for measuring risk, simulation methods, liquidity risk, backtesting, stress testing, model risk etc. Also has comprehensive technical appendices covering many technical issues such as extreme value theory, GARCH, copulas, principal component analysis etc. Comes with a CD with Excel workbooks and a collection of Matlab risk measurement functions.
A classic. Relevant chapters/sections for this Unit are on Monte Carlo simulation, Value-at-Risk, Estimating volatilities and correlations.
A book with readable material on many of the topics covered in this Unit e.g. GARCH models, VaR, decomposition of risk, back testing, stress testing, historical simulation, extreme value theory, Monte Carlo simulation, model risk and liquidity risk.
This free document, downloadable from the web, is a 284 page book full of useful information on risk modelling. You can download it in sections if you prefer. While it contains some mathematical notation that may be offputting, it is a valuable resource for Students in this Unit.
This free document, downloadable from the web, is an update and restatement of the mathematical models in the 1996 RiskMetrics Technical Documents, now known as RiskMetrics Classic. It reflects numerous modelling and technological advances that have become widespread in industry since 1996; and a commitment to transparency in modelling risk. While it contains some mathematical notation that may be offputting, it is a valuable resource for Students in this Unit.
Calculators:
Assumed Knowledge: Mathematical content
Assumed Access:
Unit iLearn Site:
Important Notice:
Topics:
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Macquarie University policies and procedures are accessible from Policy Central. Students should be aware of the following policies in particular with regard to Learning and Teaching:
Academic Honesty Policy http://mq.edu.au/policy/docs/academic_honesty/policy.html
Assessment Policy http://mq.edu.au/policy/docs/assessment/policy_2016.html
Grade Appeal Policy http://mq.edu.au/policy/docs/gradeappeal/policy.html
Complaint Management Procedure for Students and Members of the Public http://www.mq.edu.au/policy/docs/complaint_management/procedure.html
Disruption to Studies Policy (in effect until Dec 4th, 2017): http://www.mq.edu.au/policy/docs/disruption_studies/policy.html
Special Consideration Policy (in effect from Dec 4th, 2017): https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policies/special-consideration
In addition, a number of other policies can be found in the Learning and Teaching Category of Policy Central.
Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/support/student_conduct/
Results shown in iLearn, or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit ask.mq.edu.au.
Students should also consult the MAFC Program Rules & Procedures found at http://www.mafc.mq.edu.au
Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/
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For all student enquires, please contact studentsupport@mafc.mq.edu.au
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This graduate capability is supported by:
Our postgraduates will be able to demonstrate a significantly enhanced depth and breadth of knowledge, scholarly understanding, and specific subject content knowledge in their chosen fields.
This graduate capability is supported by:
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This graduate capability is supported by:
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Final Exam has been updated as a hurdle assessment.
Fail Hurdle grade added to grading descriptors table.
This Unit Guide may be subject to change. The latest version is on the Centre’s web site www.mafc.mq.edu.au.
Students should read the Unit Guide carefully at the start of semester. It contains important information about the Unit. If anything is unclear, please consult one of the unit lecturers.
University Policy on Grading:
Specific Unit Grading:
Grade | Expectation |
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High Distinction | Provides consistent evidence of deep and critical understanding in relation to the learning outcomes. There is substantial originality and insight in identifying, generating and communicating competing arguments, perspectives or problem solving approaches; critical evaluation of problems, their solutions and their implications; creativity in application as appropriate to the discipline. |
Distinction | Provides evidence of integration and evaluation of critical ideas, principles and theories, distinctive insight and ability in applying relevant skills and concepts in relation to learning outcomes. There is demonstration of frequent originality in defining and analysing issues or problems and providing solutions; and the use of means of communication appropriate to the discipline and the audience. |
Credit | Provides evidence of learning that goes beyond replication of content knowledge or skills relevant to the learning outcomes. There is demonstration of substantial understanding of fundamental concepts in the field of study and the ability to apply these concepts in a variety of contexts; convincing argumentation with appropriate coherent justification; communication of ideas fluently and clearly in terms of the conventions of the discipline. |
Pass | Provides sufficient evidence of the achievement of learning outcomes. There is demonstration of understanding and application of fundamental concepts of the field of study; routine argumentation with acceptable justification; communication of information and ideas adequately in terms of the conventions of the discipline. The learning attainment is considered satisfactory or adequate or competent or capable in relation to the specified outcomes. |
Fail | Does not provide evidence of attainment of learning outcomes. There is missing or partial or superficial or faulty understanding and application of the fundamental concepts in the field of study; missing, undeveloped, inappropriate or confusing argumentation; incomplete, confusing or lacking communication of ideas in ways that give little attention to the conventions of the discipline. |
Fail Hurdle | Student has obtained a raw mark over 50, yet failed all available attempts of at least one hurdle assessment. |
Review of Grade and final examination Script viewing:
Date | Description |
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04/04/2017 | Standards Required to Complete the Unit Satisfactorily section updated. |
28/02/2017 | PRMIA link updated. |