Course 2025-2026 a.y.

• Introduction to the course
• Interest rate risk: the repricing gap model, the duration gap model, mapping and internal transfer rates
• Value at Risk models: the parametric approach, estimating volatilities and correlations, mapping risk positions, historical simulations, backtesting.
• The applications of VaR models. Expected shortfall. Risk adjusted performance measures in financial institutions
• Liquidity: funding risk and market liquidity risk
• Credit risk: discriminant analysis and other scoring models.
• Credit risk: estimating PDs from market data, the Merton model
• Loss given default and recovery risk. Climate risk impact on credit risk estimates
• Risk-adjusted pricing of loans
• Credit portfolio models
• Regulation and supervision: the Basel I-III accords
• The EU banking resolution framework
• Risk management in insurance
• The intertwined nature of financial and underwriting risks in life insurance
• The Solvency II Rules and their implications for insurance risk management
• Asset-liability management under Solvency II

(further topics may include operationa and ESG risks, as well as review and exercises)

• Understand the different types of risks faced by banks and insurance companies.
• Understand the logic and operation of internal fund transfer in banks.
• Critically discuss the assumptions, logic and technical aspects of different risk measurement models for financial institutions.
• Compare the pros and cons of different models for the measurement of interest rate, liquidity, market and credit risk of a bank.
• Understand the overall logic and specific contents of bank capital regulation and its recent evolution following the financial crisis.
• Critically discuss the problems associated to risk management, risk governance and risk reporting within an insurance company.
• Understand the logic and technical aspects of prudential regulation in insurance companies.

• Compute the repricing and duration gap of a portfolio of banking assets and liabilities.
• Estimate VaR for a portfolio of securities using several different models.
• Backtest the results of a VaR model using different types of tests.
• Estimate the PD of a counterparty using different models and techniques.
• Measure expected loss and unexpected loss for a portfolio of credit exposures
• Estimate risk adjusted performance and risk adjusted pricing of a credit exposure based on credit VaR.
• Assess the capital adequacy of a bank based on a regulatory perspective.
• Map and quantify risks within an insurance company.
• Properly assess the capital adequacy of an insurance company from a regulatory (Solvency II) perspective.

• Lectures
• Guest speaker's talks (in class or in distance)
• Practical Exercises
• Collaborative Works / Assignments

• Guest lectures: one or more practitioners are invited to give a presentation.
• After completing a topic, some recap questions and exercises may be discussed in class
• The course materials include Excel worksheets with examples on topics such ase Monte Carlo simulations and risk adjusted performance.
• A group project will be assigned during the course.

The final grade is a combination of two elements: a written exam (accounting for 75%) and a mandatory group assignment (accounting for 25%).

For the written exam, two options are available:

• A midterm written exam on the first part of the course contents and a second written exam on the second part. The final grade is the simple average of the two partial grades. For the midterm exam, a score of at least 16/30 is required. For the second exam, the score must be such that the simple average of the two exams is at least equal to 18/30 before taking into account the result of the group assignment. The grade of the midterm exam will remain valid only for the first two sessions (May and June). Students handing in their second partial exam in May will not allowed to use their midterm result again in the June session.
• One final written exam, covering the entire course.

All exams will include both open questions and multiple-choice questions aimed at verifying that the concepts, methods and tools illustrated in the course (and the related teaching materials) have been correctly understood. The group assignment is used to evaluate how students can put into practice the skills learned during the course.

Prof. Resti (classes 44 and 47)

A. Resti, A. Sironi, Risk Management and Shareholders' Value in Banking, John Wiley, 2007. Chapters 1, 2, 3, 4, 5, 6, 7 (except 7.2.6 and 7.27), 8 (except 8.3.3 and 8.3.4), 9, 10 (except 10.3 and 10.4), 11, 12, 14 (except 14.4, 14.5 and 14.7), 15

A. Resti, A. Sironi, Liquidity risk, mimeo (will be made available to Students on the course’s blackboard page)

Course slides

Prof. Gabbi (classes 45 and 46)

A. Resti, A. Sironi, Risk Management and Shareholders' Value in Banking, John Wiley, 2007. Chapters 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 17

EBA, Guidelines on the management of environmental, social and governance (ESG) risks

Course slides

Prof. Carletti (all classes - the materials below should be seen as provisional and may be modified during the course):

Kern, A. (2019), Principles of Banking Regulation, Cambridge University Press, Chapter 4

ECB (2010), “Macro-prudential policy objectives and tools,” Financial Stability Review, IV

Osiński, J., K. Seal and L. Hoogduin (2013), “Macroprudential and Microprudential Policies: Toward Cohabitation,” IMF Staff Discussion Note

BIS (2013), “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools”

ECB (2025), “SSM Supervisory Methodology 2025”

ECB (2018), “Guide to the Internal Capital Adequacy Assessment Process (ICAAP)”

Boccuzzi, G. (2016), The European Banking Union: Supervision and Resolution, Palgrave MacMillan, Chapter 3-4, available online in the library

FINMA* (2023), “Report and Lessons Learned from the Credit Suisse Crisis”

FED* (2023), “Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank”

(*case studies)

Course slides

Prof. Corvino (all classes)

Corvino, Giuseppe and Corinti, Alberto, Interest Rate Volatility and Life Insurance Solvency: A Technical Analysis of Asset-Liability Management under Solvency II (September 30, 2025)

Course slides