Course Details in 2024/25 Session

Module Title	LM Interest Rate and Credit Risk Modelling
School	Mathematics
Department	Mathematics
Module Code	06 39850
Module Lead	TBC
Level	Masters Level
Credits	10
Semester	Semester 1
Pre-requisites
Co-requisites
Restrictions	None
Contact Hours	Lecture-24 hours Guided independent study-76 hours Total: 100 hours
Exclusions
Description	This module provides students with an in-depth understanding of the mathematical models used in analyzing and managing interest rate and credit risks. The module focuses on the fundamental concepts, techniques, and applications of interest rate modeling and credit risk assessment in financial markets. Students will be introduced to the key theoretical concepts of interest rates, including yield curves, term structure models, and interest rate derivatives. Students will explore different interest rate models, such as the Vasicek, Cox-Ingersoll-Ross (CIR), and Heath-Jarrow-Morton (HJM) models, and learn how to calibrate and simulate these models to capture real-world interest rate dynamics. Students will also explore credit risk modeling, where students will examine the quantitative methods used to assess and quantify credit risk in financial institutions. Topics covered include credit rating agencies, credit default swaps, credit risk measures (such as credit value-at-risk), and the modeling of default probabilities using techniques like structural models and intensity-based models. Throughout the module, students will develop their programming skills using mathematical software packages such as MATLAB or Python. They will gain hands-on experience in implementing interest rate and credit risk models, conducting simulations, and analyzing the results to make informed decisions. The module also emphasizes the practical application of these models in risk management and financial decision-making. Students will learn how to use interest rate models to price interest rate derivatives, value bonds, and manage interest rate risk in fixed-income portfolios. They will also explore the use of credit risk models in credit portfolio management, loan pricing, and credit risk hedging strategies.
Learning Outcomes	By the end of the module students should be able to: By the end of the module, students will have a comprehensive understanding of interest rate and credit risk modelling techniques and their applications in the financial industry. They will be equipped with the knowledge and skills necessary to analyse, model, and manage interest rate and credit risks in various financial contexts, providing them with a competitive edge in careers such as quantitative finance, risk management, and financial consulting.
Assessment
Assessment Methods & Exceptions	Assessment: 80% examination, 20% coursework. Reassessment: Resit examination
Other
Reading List