FIN285a: Computer Simulations and Risk Assessment

Fall 2011

Announcements: Wed December 7th, 2011

• Group projects due today
• Last class
• Final exam: Wednesday, Dec 14th, 6:00-9:00pm
• Final exam coverage: See lectures section
• Exam weighted on the last half of class
• Review session: Sunday 11th, 3-5pm Chancellor's suite
• Problem sets: Check grades by Monday, December 12th. Report any problems to Jing.
• Extra office hours :
  1. Jing Ren: Thursday 8-10pm, Tuesday 3-5
  2. Blake LeBaron: Friday 11-12, Monday 5-6, Tuesday 2-3, Wednesday 5-5:45
• All notes and problem set solutions up
• Today's topics
  1. Note: Skipping fixed/floating swap example
  2. Finish default (credit) risk
     Hull and White, The risk of tranches from residential mortgages
     The formula that killed Wall St., Wired
  3. Backtesting, chapter 8
  4. Other risks (Barings, LTCM)
     1. Barings bank, Marthinsen, 7
     2. LTCM, Marthinsen, 8
     3. Skip: CoVaR, Amaranth
  5. Wrap up (section 13)
     1. Danielson, chapter 10
     2. Hull, The credit crunch of 2007: What went wrong? Why? What lessons can be learned?