Risk Management Institute

MSc in Financial Engineering

Program Structure

Compulsory Modules

FE 5101 Derivatives and Fixed Income

Basic theories of futures, options, and swaps pricing. Fundamental concepts of no arbitrage equilibrium and also risk premia. Hedging techniques and the Greeks. Fixed Income securities analytics. Yield curve analyses. Extensions to asset-backed securities and asset securitization issues. Structured notes and embedded options. Corporate debts and convertibles.

FE 5107 Risk Analyses and Management

Market risk. Value-at-Risk measures and problems. Parametric historical, and simulations VAR. Alternative securities risk and derivatives risk measurements. Delta-normal VARs and applications to different products. Credit risks and measurements. Liquidity, operational risk, legal risk, settlement risk, model risk, tax risk and others, Stress testing, Accounting and legal compliance. Some existing models and Risk Management best practices.

FE 5110 Financial Engineering Project

Students are encouraged to work on a project related to an actual problem at work involving financial engineering solutions. Otherwise students could work on a new product or process idea, or a detailed case study. The report about 60x double-spaced A4 pages including appendixes should be carefully written and submitted.

FE 5112 Stochastic Calculus and Quantitative Methods

This module will cover the fundamental concepts of stochastic calculus as well as quantitative methods that are relevant to financial engineering. The topics include Wiener processes, stochastic integrals, stochastic differential equations, Ito’s lemma, the martingale principle and risk neutral pricing. It will also cover important topics in linear algebra and optimization.

FE 5116 Programming and Advanced Numerical Methods

This module will cover both computer programming and numerical methods. On the programming side, this module will cover Octave language. The emphasis will be given to programming to solve financial engineering problems. On the numerical methods side, this module will cover finite difference, discretization and Monte Carlo simulation methods.

FE 5209 Financial Econometrics

The statistical modelling and forecasting of financial time series, with application to share prices, exchange rates and interest rates. Market microstructure. Specification, estimation and testing of asset pricing models including the capital asset pricing model and extensions; Modelling of volatility. Practical application of volatility forecasting. Estimating continuous time models.

Elective Modules

FE 5103 Equity Products and Exotics

Covered warrants, equity warrants and options, subscription rights, stock index futures and options, and other equity derivatives. Issues of pricing and hedging. Institutional constraints. Portfolio management and other investment strategies. Path-dependent options such as Asian options, barrier options, lookback options, and forward-start options. Spread options, rainbow options, quantos, exchange options, basket options, as-you-like options, power options, digital options, and others. Pricing techniques and risk management purposes.

FE 5105 Corporate Financing and Risk

Financial Markets and Instruments. Management of foreign exchange, money market, and derivatives desks. Asset-Liability management. Regulatory issues. Corporate Valuation, restructuring, leveraged buyouts, mergers and acquisitions. Issues of deal structures and management of cashflows.

FE 5108 Portfolio Theory and Investments

Portfolio Optimisation Theory. Capital Asset Pricing Models. Arbitrage Pricing Theories. Factor Models. Market Neutral Strategies. Abnormalities and Market Mispricing. Asset Allocation and Dynamic Portfolio Optimization. Portfolio Insurance Problems, and Global Funds Management.

FE 5208 Term Structure and Interest Rate Derivatives

This module will cover both term structure models as well as the valuations of interest rate derivatives. The topics covered include Vasicek , Ho-Lee, Cox-Ingersoll-Ross (CIR), Heath-Jarrow-Morton (HJM) and LIBOR market models. On the numerical side it will cover Black-Derman-Toy (BDT) and Hull-White models as well as some simulation methods.

FE 5210 Research Methods in Finance

This module aims to facilitate students in developing the basic skills for independent research, and to promote their motivations and interests in finding and solving problems. During the study of a research question, students are to demonstrate their progress in acquiring techniques, and to develop presentation skills including effective oral communication and scientific research report writing. Offerings of this module in different years may have different areas of focus.

FE 5211 Seminar in Financial Engineering

Topics relating to financial engineering.

FE 5215 Seminar in Financial Product Innovations

New topics and areas in financial products development and market applications.

FE 5216 Financial Technology Innovations Seminar

New topic and areas in financial technologies including information technology applications, electronic commerce, and other electronic applications to finance problems.

FE 5217 Seminar in Risk Management and Alternative Investment

Topics would cover various alternative investments and risk management.

FE 5218 Credit Risk

The course consists of two parts - (i) statistical credit rating models and (ii) credit derivatives. The first part would cover various statistical credit rating models including Altman’s Z-score, logistic regression, artificial neural network and intensity models. The second part will cover various models used to price credit derivative as well as tools used to manage credit risk. The topics covered would include real and risk neutral probabilities of default, RiskMetricsTM, CreditRisk+, default correlation, Copula, Basket default swap, CDOs etc.

FE 5219 Credit Analytics Practicum

This module will provide students with the opportunity to work on real-world problems in quantitative credit analysis. The module will be project based within either a research or industry environment. Students will gain a detailed knowledge of the project subject matter, along with an overall understanding of quantitative credit analysis.

The projects will be group-based with up to three students in a group. Most of the groups will be based in RMI’s Credit Research Initiative, and students can also source for an external company to host their projects. This is a 6 Modular Credits (MCs) module.

FE 5221 Trading Principles & Fundamentals

This module aims to familiarize the students with the reality of trading within the financial markets environment. Beyond the pure trading principles, it covers the many aspects of trading decisions, in terms of risk control and limits, market and economic data and information, overall portfolio management, practical market standards and conventions, specificities of derivatives trading, trading styles and techniques to manage specific market situations. This is a 2 MCs module.  

This module should prepare students to better grasp trading and financial markets and allow them to become effective in a work environment in a record short time.

FE 5222 Advanced Derivatives Pricing

This module will cover the advanced topics related to derivative pricing, including stochastic differential equations, martingale representation theorem and risk-neutral pricing, the change of numeraire argument and pricing of pathdependent options (e.g. barrier, lookback, and Asian options), optimal stopping and American options, jump diffusion processes and stochastic volatility for option pricing.

FE 5223 Introduction to Electronic Financial Market

The fundamentals of financial market technologies and functionality in the Front-, Middle- and Back-offices, the interdependencies of their systems, typical user interfaces, through to typical system architecture will be taught. Principals of algorithmic trading will also be covered, and students will be challenged to design solutions for real-market trading strategies. This is a 2 MCs module.

FE 5224 Current Topics in Applied Risk Management

The global financial crisis triggered a set of structural changes that continue to play out in market microstructure and market architecture. Practitioners, on both the buy-side and sell-side, are in the midst of responding to new regulations around bank capital, operational risk, supervision and other non-market factors. The backdrop is complicated further by apparent disinflation, greater potential for event risk, macro-prudential interventions and in places, negative interest rates. The risk management context is also coloured by innovation in ‘fintech’ and cyber-risk. Each year, the course will focus on a subset of these topics based on what is most “current”. The objective is to give students the ability to take the depth of technical skills acquired in core modules and apply them to the immediate context of potential employers. This is a 2 MCs module.

FE 5226 C++ in Financial Engineering

The course covers C++ basic constructs (loops, variables, operators, and functions), built-in libraries, data structures, templates and object oriented programming techniques. It develops logical thinking aimed at designing algorithms to solve specific problems. Concepts are illustrated by examples drawn from the financial engineering domain. The course will ultimately provide with an overview of the components of a modern risk management system.