Management of Market and Operational Risk

The objectives and tasks of management in market and operational risks The organization of risk management at market and operational risks The basic methods of VaR calculations for market risks: variance/co-variance approach, historical simulation and Monte Carlo simulation, their application on stock prices, interest changes and foreign currency risks. Back testing and stress testing for market risks Controlling instruments for market risks The extent of operational risk and its limitations on other types of risks Qualitative and quantitative models for the determination of operational risks Controlling instruments for operational risks The basic oversight regulations for market and operational risks

Mode of delivery

face to face



Recommended or required reading and other learning resources/tools

Philippe Jorion (2007): Financial Risk Manager Handbook, Wiley & Sons, New York, 4th edition Philippe Jorion (2007): The Value at Risk: The Benchmark for Controlling Market Risk, Mc Graw Hill, New York, 3rd edition Michel Crouhy/Dan Galai/ Robert Mark (

Planned learning activities and teaching methods

Integrated course (in two groups) Lectures and exercises

Assessment methods and criteria

Written mid-term exams – 30% Written final exam – 70%

Prerequisites and co-requisites

Fixed income, equity and portfolio selection, options, financial mathematics, statistics


Degree programme

Banking and Finance (Bachelor)



ECTS Credits


Language of instruction




Academic year



4 SS



Learning outcome

The students should be able to judge market and operational risks and their relevance within a bank. They should further be capable of participating in the determination and control of these risks. The students should be in the position to evaluate the relevant approaches to managing the risks and their strengths and weaknesses, as well as being able to carry out VaR calculations for market risk. The students would have the competence to independently install a VaR model for small portfolios. They would further be able to apply the “Back testing” and “Stress testing” programmes while being able to explain the possibility of controlling these risks. In addition they would explain the basic methods and difficulties in the measurement of operational risk and the relevant controlling instruments. Finally the students should be capable of explaining the basic oversight regulations for both market and operational risks.

Course code