Code
MGFE FIN 6208
Niveau
M2
Discipline
Finance
Langue
Anglais/English
Crédits ECTS
2
Heures programmées
18
Charge totale étudiant
40
Coordonnateur(s)
Département
- Data analytics, Économie et Finances
- Programme Grande École
Equipe pédagogique
Introduction au module
This course provides an advanced understanding of risks and volatility in financial markets. It introduces the functioning of financial markets, financial instruments, market mechanisms, risk categories, option pricing and sensitivities, duration, volatility measures, Value at Risk, and correlation and covariance risk. Students will learn how to analyse financial risks, interpret market indicators and apply risk management tools in practical market situations.
Finalité d'apprentissage (Bloc de compétences)
- 5. Élaborer une vision stratégique et innovante, en s’appuyant sur les potentiels de l’intelligence digitale et sur un écosystème favorable
Objectifs d'apprentissage
- 5.1 - Conduire une veille sur les évolutions globales et systémiques des écosystèmes, dans un environnement international, en vue d'anticiper les transformations et innovations possibles, et de proposer des réponses pro-actives et proportionnées aux gran
Traits de compétences
By the end of this PGE M2 course, students will be able to:
1. Analyse the role, functioning and main participants of financial markets, including primary and secondary markets, investors, financial institutions, issuers, brokers and intermediaries.
2. Distinguish the main financial instruments and market mechanisms, including stocks, bonds, derivatives, ETFs, spot transactions, forward transactions, futures contracts, margin calls and order types.
3. Identify and assess major financial risks, including market risk, systemic risk, currency risk, credit risk, liquidity risk, counterparty risk, operational risk and regulatory risk.
4. Calculate and interpret risk measures such as Value at Risk, Expected Shortfall, exposure, default probability and Credit Value Adjustment.
5. Apply option pricing principles and interpret option risk sensitivities, including delta, gamma, theta, vega and rho, in order to analyse hedging and risk management strategies.
6. Calculate and interpret bond duration, modified duration, dollar duration and DV01 in order to assess interest rate risk and construct hedging strategies.
7. Compare historical volatility, implied volatility, volatility indices, volatility surfaces, skew, smile and term structure in order to assess market expectations and volatility risk.
8. Analyse correlation and covariance risk in multi-underlying products, including basket options, WorstOf products, dispersion trades and correlation-sensitive strategies.
Contenu : structure du module et agenda
1. Financial Markets
1.1 The role and usefulness of financial markets
1.2 Money markets and financial markets
1.3 Primary and secondary markets
1.4 Key players in financial markets
1.5 Financial instruments: stocks, bonds, derivatives and ETFs
1.6 Transactions, speculation, hedging and regulation
2. Mechanisms and Products
2.1 Stocks and shareholder rights
2.2 Stock market price formation and trading mechanisms
2.3 Market orders, limit orders, stop orders and stop-limit orders
2.4 Bonds and bond market mechanisms
2.5 Spot transactions, forward transactions and futures contracts
2.6 Margin call mechanisms and mark-to-market
3. Risks in Financial Markets
3.1 Definition and classification of financial risks
3.2 Market risk, systemic risk and currency risk
3.3 Credit risk, liquidity risk, bond market risk and corporate failure risk
3.4 Counterparty risk and risks associated with derivatives
3.5 Operational risk, cybersecurity risk and fraud risk
3.6 Regulatory risk and compliance risk
3.7 Financial crises and regulatory responses
3.8 Value adjustments: CVA, DVA, FVA and MVA
3.9 Value at Risk, Expected Shortfall and limits of risk models
4. Options
4.1 Black-Scholes model and risk-neutral pricing
4.2 European calls and puts
4.3 Payoff, premium, moneyness, intrinsic value and time value
4.4 Put-call parity
4.5 Option sensitivities: delta, gamma, theta, vega and rho
4.6 Static and dynamic hedging
4.7 Finite difference approximation
5. Duration
5.1 Bond pricing formula
5.2 Interest rate risk and price-yield relationship
5.3 Macaulay duration and modified duration
5.4 Dollar duration and DV01
5.5 Duration of a portfolio
5.6 Hedging a bond portfolio using duration
6. Volatility
6.1 Definition and role of volatility
6.2 Historical volatility and implied volatility
6.3 Volatility indices
6.4 Realised volatility and implied volatility calculation
6.5 Volatility smile, skew and term structure
6.6 Local volatility, stochastic volatility and terminal volatility
6.7 Volatility trading strategies: call-spread, put-spread, straddle and strangle
6.8 P&L of a volatility trade and volatility dynamics
7. Correlation and Covariance Risk
7.1 Economic and statistical definitions of correlation
7.2 Covariance, correlation and portfolio variance
7.3 Historical, terminal and implied correlation
7.4 Correlation-dependent products: basket options and WorstOf options
7.5 Correlation trading products: call vs calls, dispersion straddles and realised correlation swaps
7.6 Estimating historical correlation
7.7 Asynchrony and market closing times
7.8 Management of a multi-underlying product portfolio
Contribution à l'atteinte des ODD (Objets du Développement Durable)
SDG 8 – Decent Work and Economic Growth: This course contributes to SDG 8 by training students to identify, measure and manage financial risks, thereby supporting more resilient financial decision-making and sustainable economic activity.
Nombre d'ODD abordés parmi les 17
1
Apprentissage
Mixte
Méthode pédagogique
The course combines lectures, exercises and practical applications using the Société Générale trading room environment. Lectures introduce the concepts, instruments and models used to analyse risks and volatility in financial markets. Exercises allow students to apply pricing, risk measurement and hedging methods. Practical sessions connect the course content to market data, trading room tools and financial decision-making situations.
Système de notation et modalités de rattrapage
Attendance is mandatory for this course.
The assessment evaluates students’ ability to apply risk analysis, volatility measurement and financial market tools to practical and quantitative situations. It measures their capacity to identify financial risks, calculate and interpret market risk indicators, analyse volatility and correlation structures, apply option sensitivity measures, and use market-based tools to support financial decision-making.
The final grade consists of two graded tutorial assignments:
• Graded tutorial assignment 1: 50% of the final grade.
• Graded tutorial assignment 2: 50% of the final grade.
Each tutorial assignment is graded out of 20.
Unjustified absences will result in a penalty equal to 20% of the module grade.
The second-chance assessment, CF2, consists of a written in-class exam.
Règlement du module
1. Professor–Student Communication
The professor will communicate with students through their institutional school email address (IMT-BS/TSP) and/or the Moodle portal. No communication will be sent to personal email addresses. Students are responsible for regularly checking their IMT-BS/TSP mailbox and Moodle announcements.
Students may contact the professor by email using the professor’s institutional email address. When necessary, students may meet the professor during office hours or by appointment.
2. Students with Accommodation Needs
Students who have a disability or any specific accommodation need that may affect their ability to complete the required work must inform the professor during the first class, in order to facilitate the necessary arrangements in accordance with the school’s applicable procedures.
3. Class Attendance and Behaviour
Students are expected to attend class, arrive on time and behave respectfully throughout the session.
Unless explicitly authorised by the professor, the use of electronic devices, including computers, mobile phones and tablets, is prohibited during class. Students are not allowed to take photos, videos or audio recordings in the classroom without the professor’s explicit consent.
Students must avoid disruptive or disrespectful behaviour, including arriving late, leaving early, sleeping, reading non-course material, using inappropriate language, speaking over others, eating or drinking during class, or engaging in any behaviour that disturbs the class. A warning may be given for a first violation. Repeated violations may lead to penalties, exclusion from the class and/or disciplinary proceedings.
A delay of up to 10 minutes is tolerated at the beginning of class. Attendance will be recorded on Edusign during this 10-minute period using a QR code provided by the professor at the start of each session.
Leaving the classroom before the end of the session without the professor’s approval will be considered an absence.
In the case of remote learning, students must keep their camera on unless instructed otherwise by the professor.
4. Exams and Assessments
Students must arrive on time for exams and other assessments. A delay of up to 10 minutes is tolerated.
No student may continue the exam once the allocated time is over. No student may leave the room during an examination unless they have finished the exam and handed in all required documents.
Only the following items are allowed during exams:
• pens;
• student card;
• a non-programmable calculator, or a programmable calculator with activated EXAM mode.
All other items are prohibited.
Possession of any unauthorised electronic device, even if turned off, will be considered cheating.
Possession of a programmable calculator without activated EXAM mode, even if turned off, will be considered cheating.
A random check may be carried out after students are instructed to activate EXAM mode. Failure to prove that EXAM mode has been activated after this instruction will be considered cheating.
Students are responsible for knowing how to activate EXAM mode on their calculator before the exam.
Any violation of the instructions given by the professor or the examination supervision team will be reported to the Discipline Committee.
Références obligatoires et lectures suggérées
1. Hull, J. C., Options, Futures, and Other Derivatives.
2. Hull, J. C., Risk Management and Financial Institutions.
3. Jorion, P., Value at Risk: The New Benchmark for Managing Financial Risk.
4. McNeil, A. J., Frey, R. and Embrechts, P., Quantitative Risk Management: Concepts, Techniques and Tools.
5. Natenberg, S., Option Volatility and Pricing.
6. Gatheral, J., The Volatility Surface: A Practitioner’s Guide.
7. Taleb, N. N., Dynamic Hedging: Managing Vanilla and Exotic Options.
8. Fabozzi, F. J., Bond Markets, Analysis, and Strategies.
Mots-clés
Financial markets; market risk; systemic risk; credit risk; counterparty risk; operational risk; regulatory risk; Value at Risk; Expected Shortfall; CVA; options; Black-Scholes model; Greeks; duration; DV01; volatility; implied volatility; volatility surface; correlation risk; covariance risk; WorstOf products; dispersion trading.
Prérequis
ACC 3403 EN (equivalent ACC 3003 FR), FIN3409 EN (equivalent FIN 3009 FR), INF 3403 EN (equivalent INF 3003 FR), LinkedIn Learning - Statistics Foundations 1 and 2