1.

Project Title: Calculating Value at Risk (VaR) and Expected Shortfall (ES) of a Portfolio**

Description:
This project aims to teach students how to measure and manage the risk of a financial
portfolio using two key risk metrics: Value at Risk (VaR) and Expected Shortfall (ES).

Detailed Work:
- Data Collection: Gather historical price data for a selection of assets in a portfolio (e.g.,
stocks, bonds).
- Data Cleaning: Clean and preprocess the data for analysis.
- VaR Calculation:
- Implement different methods for VaR calculation such as Historical Simulation, Variance-
Covariance, and Monte Carlo Simulation.
- Compare the results from different methods.
-Expected Shortfall Calculation:
- Calculate the Expected Shortfall, which measures the average loss in the worst-case
scenarios beyond the VaR threshold.
- Visualization: Plot the risk metrics over time and across different assets.
- Interpretation: Analyze the results and provide insights into the risk profile of the portfolio.

2. Project Title: Credit Scoring of Clients

Description:
This project involves developing a credit scoring model to evaluate the creditworthiness of
clients based on their financial and demographic data.

Detailed Work:
- Data Collection: Obtain a dataset containing information about clients' financial history,
demographics, and credit outcomes.
- Data Preprocessing:
- Handle missing values, encode categorical variables, and normalize numerical features.
- Exploratory Data Analysis (EDA):
- Conduct EDA to understand the relationships between different variables and the target
variable (creditworthiness).
- Feature Selection: Select important features that contribute significantly to predicting credit
scores.
- Model Development:
- Implement various machine learning algorithms such as Logistic Regression, Decision
Trees, Random Forest, and Gradient Boosting.
- Train and validate the models using techniques like cross-validation.
- Model Evaluation:
- Evaluate the models using metrics such as Accuracy, Precision, Recall, F1-Score, and
AUC-ROC.
- Compare the performance of different models.
- Deployment:
- Create a simple web application where users can input client data and receive a credit
score prediction.
- Interpretation: Provide insights and recommendations based on the model's predictions.
 1. Examining sentiment in financial news and comparing them to stock market
trends.
2. Analysing and forecasting financial time series.data such as stock price and
interest rate.
3. Utilising machine learning algorithms to forecast future stock values based on
past performance.
4. Use libraries such as Dash or Plotly to create interactive dashboards that
visualise financial data and generate reports.
5. Creating trading algorithms that follow established criteria.
6. Use methods like portfolio optimization to improve asset allocation.
7. Develop models to estimate loan applicants' creditworthiness.
8. Clustering bank clients by transaction behaviour and demographics.
9. Identifying fraudulent transactions with anomaly detection algorithms.
10. Develop scripts to generate financial reports from raw data.

R Projects with Financial Data

1. Analysing the influence of certain events on stock prices through event study
methodology.
2. Using Financial Econometrics approaches to model and analyse financial data.
3. Assessing the impact of risk and uncertainty in financial forecasts.
4. R-based analysis of macroeconomic variables and their impact on financial
markets.Using Monte Carlo Simulations.
5. Create GARCH models for analysing volatility in financial time series data and
projecting future volatility.
6. Use the quantstrat package to create and backtest algorithmic trading
strategies.
7. Create Interactive Reports with Shiny package in R.
8. Analysing the influence of certain events on stock prices through event study
methodology.
A project which will be useful for Finance students to gain experience with Python is
analyzing the stock price data of companies and forecasting the future growth or decay
of the stock.

The steps involved in this project are:

1. Data Extraction and Exploration: Dataframes in Python makes the process of

2. Data Visualization: Plotly module in Python is extremely useful in creating user-

3. Risk Analysis: The returns and standard deviations can be calculated using
Dataframe operations for this analysis.

4. Forecasting: The concept of SImple Moving Average (SMA) can be used to look for
trends in the stock price movement. This can be done easily in Python.
1) VaR and expected shortfall calculations using the 252-day data's profit and
loss strips. When weighing profit and loss strips, assume that Lambda equals 0.994.
Create a R code for the same, and ensure that the inputs include the Confidence level
and PnL strips so that the code can be adjusted to work with any regulator
(FINMA, etc.)

2) Write a code for the computation of FRTB market risk capital for Equity Delta,
Vega, and Curvature.
(Total 3 codes, one code for each Delta, Vega and Curvature)

i) Select a small random input (a portfolio containing at least ten distinct ISINs in at
least four buckets), assume that some random values will emerge from Excel as
sensitivities, and confirm that all numbers are in millions.

To grasp the jargon associated with market risk and to find the different risk
weights used in the calculation, consult the documentation that BCBS recommends
(you can get this on their website for free).

The two aforementioned projects (Basel 2.5 & 3) can help you become familiar with R
programming and provide an excellent introduction to market risk concepts.