SDST4608 Market risk analysis (6 credits) Academic Year 2025
Offering Department SCDS (Department of Statistics and Actuarial Science) Quota ---
Course Co-ordinator Dr Z Zhang, SCDS (Department of Statistics and Actuarial Science) < zhangz08@hku.hk >
Teachers Involved (Dr Z Zhang,Statistics & Actuarial Science)
Course Objectives Financial risk management has experienced a revolution in the last decade thanks to the introduction of new methods for measuring risk, particularly Value-at-Risk (VaR).  This course introduces modern risk management techniques covering the measurement of market risk using VaR models and financial time series models, and stress testing.
Course Contents & Topics Risk Measures; Value-at-Risk (VaR) models (parametric, Monte Carlo simulation and Historical simulation); Risk factor mapping; Advanced VaR models (GARCH-type models, extreme-value theory and normal-mixture); Principal Component Analysis and VaR; Backtesting and stress testing.
Course Learning Outcomes
On successful completion of this course, students should be able to:

CLO 1 understand VaR and expected shortfall as risk measures
CLO 2 compute VaR and expected shortfall
CLO 3 model volatility using GARCH-type models
CLO 4 understand extreme-value theory
CLO 5 understand backtesting and stress testing
Pre-requisites
(and Co-requisites and
Impermissible combinations)		 Pass in SDST3907 and SDST3910; or
Pass in SDST4601 and (FINA2320 or SDST3609)
Only for students admitted in 2025 and thereafter.
Course Status with Related Major/Minor /Professional Core 2U000C00 Course not offered under any Major/Minor/Professional core
2024 Major in Risk Management ( Disciplinary Elective )
2024 Minor in Risk Management ( Disciplinary Elective )
2023 Major in Risk Management ( Disciplinary Elective )
2023 Minor in Risk Management ( Disciplinary Elective )
2022 Major in Risk Management ( Disciplinary Elective )
2022 Minor in Risk Management ( Disciplinary Elective )
2021 Major in Risk Management ( Disciplinary Elective )
2021 Minor in Risk Management ( Disciplinary Elective )
Course to PLO Mapping 2024 Major in Risk Management < PLO 1,2,3,4,5,6 >
2023 Major in Risk Management < PLO 1,2,3,4,5,6 >
2022 Major in Risk Management < PLO 1,2,3,4,5,6 >
2021 Major in Risk Management < PLO 1,2,3,4,5,6 >
Offer in 2025 - 2026 Y        2nd sem    Examination May     
Offer in 2026 - 2027 Y
Course Grade A+ to F
Grade Descriptors
A Demonstrate thorough mastery at an advanced level of extensive knowledge and skills required for attaining all the course learning outcomes. Show strong analytical and critical abilities and logical thinking, with evidence of original thought, and ability to apply knowledge to a wide range of complex, familiar and unfamiliar situations. Apply highly effective organizational and presentational skills.
B Demonstrate substantial command of a broad range of knowledge and skills required for attaining at least most of the course learning outcomes. Show evidence of analytical and critical abilities and logical thinking, and ability to apply knowledge to familiar and some unfamiliar situations. Apply effective organizational and presentational skills.
C Demonstrate general but incomplete command of knowledge and skills required for attaining most of the course learning outcomes. Show evidence of some analytical and critical abilities and logical thinking, and ability to apply knowledge to most familiar situations. Apply moderately effective organizational and presentational skills.
D Demonstrate partial but limited command of knowledge and skills required for attaining some of the course learning outcomes. Show evidence of some coherent and logical thinking, but with limited analytical and critical abilities. Show limited ability to apply knowledge to solve problems. Apply limited or barely effective organizational and presentational skills.
Fail Demonstrate little or no evidence of command of knowledge and skills required for attaining the course learning outcomes. Lack of analytical and critical abilities, logical and coherent thinking. Show very little or no ability to apply knowledge to solve problems. Organization and presentational skills are minimally effective or ineffective.
Communication-intensive Course N
Course Type Lecture-based course
Course Teaching
& Learning Activities
Activities Details No. of Hours
Lectures 36.0
Tutorials 12.0
Reading / Self study 100.0
Assessment Methods
and Weighting
Methods Details Weighting in final
course grade (%)		 Assessment Methods
to CLO Mapping
Assignments Coursework (assignments, tutorials, and a group project) 50.0 1,2,3,4,5
Examination One 2-hour written examination 50.0 1,2,3,4,5
Required/recommended reading
and online materials		 Jorion, P.: Value-at-Risk: The New Benchmark for Managing Financial Risk (McGraw-Hill, 2007, 3rd edition)
Alexander, C.: Market Models: A Guide to Financial Data Analysis (Wiley, 2001)
Alexander, C.: Market Risk Analysis: Practical Financial Econometrics (Wiley, 2008)
Alexander, C.: Market Risk Analysis: Value-at-Risk Models (Wiley, 2009)
Tsay, R. S.: Analysis of Financial Time Series (Wiley, 2005, 2nd edition)
Course Website http://moodle.hku.hk
Additional Course Information NIL