Search result: Catalogue data in Autumn Semester 2019

Mathematics Master Information
Application Area
Only necessary and eligible for the Master degree in Applied Mathematics.
One of the application areas specified must be selected for the category Application Area for the Master degree in Applied Mathematics. At least 8 credits are required in the chosen application area.
401-3929-00LFinancial Risk Management in Social and Pension Insurance Information W4 credits2VP. Blum
AbstractInvestment returns are an important source of funding for social and pension insurance, and financial risk is an important threat to stability. We study short-term and long-term financial risk and its interplay with other risk factors, and we develop methods for the measurement and management of financial risk and return in an asset/liability context with the goal of assuring sustainable funding.
ObjectiveUnderstand the basic asset-liability framework: essential principles and properties of social and pension insurance; cash flow matching, duration matching, valuation portfolio and loose coupling; the notion of financial risk; long-term vs. short-term risk; coherent measures of risk.

Understand the conditions for sustainable funding: derivation of required returns; interplay between return levels, contribution levels and other parameters; influence of guaranteed benefits.

Understand the notion of risk-taking capability: capital process as a random walk; measures of long-term risk and relation to capital; short-term solvency vs. long-term stability; effect of embedded options and guarantees; interplay between required return and risk-taking capability.

Be able to study empirical properties of financial assets: the Normal hypothesis and the deviations from it; statistical tools for investigating relevant risk and return properties of financial assets; time aggregation properties; be able to conduct analysis of real data for the most important asset classes.

Understand and be able to carry out portfolio construction: the concept of diversification; limitations to diversification; correlation breakdown; incorporation of constraints; sensitivities and shortcomings of optimized portfolios.

Understand and interpret the asset-liability interplay: the optimized portfolio in the asset-liability framework; short-term risk vs. long-term risk; the influence of constraints; feasible and non-feasible solutions; practical considerations.

Understand and be able to address essential problems in asset / liability management, e.g. optimal risk / return positioning, optimal discount rate, target value for funding ratio or turnaround issues.

Have an overall view: see the big picture of what asset returns can and cannot contribute to social security; be aware of the most relevant outcomes; know the role of the actuary in the financial risk management process.
ContentFor pension insurance and other forms of social insurance, investment returns are an important source of funding. In order to earn these returns, substantial financial risks must be taken, and these risks represent an important threat to financial stability, in the long term and in the short term.

Risk and return of financial assets cannot be separated from one another and, hence, asset management and risk management cannot be separated either. Managing financial risk in social and pension insurance is, therefore, the task of reconciling the contradictory dimensions of

1. Required return for a sustainable funding of the institution,
2. Risk-taking capability of the institution,
3. Returns available from financial assets in the market,
4. Risks incurred by investing in these assets.

This task must be accomplished under a number of constraints. Financial risk management in social insurance also means reconciling the long time horizon of the promised insurance benefits with the short time horizon of financial markets and financial risk.

It is not the goal of this lecture to provide the students with any cookbook recipes that can readily be applied without further reflection. The goal is rather to enable the students to develop their own understanding of the problems and possible solutions associated with the management of financial risks in social and pension insurance.

To this end, a rigorous intellectual framework will be developed and a powerful set of mathematical tools from the fields of actuarial mathematics and quantitative risk management will be applied. When analyzing the properties of financial assets, an empirical viewpoint will be taken using statistical tools and considering real-world data.
Lecture notesExtensive handouts will be provided. Moreover, practical examples and data sets in Excel and R will be made available.
Prerequisites / NoticeSolid base knowledge of probability and statistics is indispensable. Specialized concepts from financial and insurance mathematics as well as quantitative risk management will be introduced in the lecture as needed, but some prior knowledge in some of these areas would be an advantage.

This course counts towards the diploma of "Aktuar SAV".

The exams ONLY take place during the official ETH examination period.
363-0537-00LResource and Environmental EconomicsW3 credits2GL. Bretschger
AbstractRelationship between economy and environment, market failure, external effects and public goods, contingent valuation, internalisation of externalities; economics of non-renewable resources, economics of renewable resources, cost-benefit analysis, sustainability, and international aspects of resource and environmental economics.
ObjectiveUnderstanding of the basic issues and methods in resource and environmental economics; ability to solve typical problems in the field using the appropriate tools, which are concise verbal explanations, diagrams or mathematical expressions.

Topics are:
Introduction to resource and environmental economics
Importance of resource and environmental economics
Main issues of resource and environmental economics
Normative basis
Fairness according to Rawls
Economic growth and environment
Externalities in the environmental sphere
Governmental internalisation of externalities
Private internalisation of externalities: the Coase theorem
Free rider problem and public goods
Types of public policy
Efficient level of pollution
Tax vs. permits
Command and Control Instruments
Empirical data on non-renewable natural resources
Optimal price development: the Hotelling-rule
Effects of exploration and Backstop-technology
Effects of different types of markets.
Biological growth function
Optimal depletion of renewable resources
Social inefficiency as result of over-use of open-access resources
Cost-benefit analysis and the environment
Measuring environmental benefit
Measuring costs
Concept of sustainability
Technological feasibility
Conflicts sustainability / optimality
Indicators of sustainability
Problem of climate change
Cost and benefit of climate change
Climate change as international ecological externality
International climate policy: Kyoto protocol
Implementation of the Kyoto protocol in Switzerland
ContentEconomy and natural environment, welfare concepts and market failure, external effects and public goods, measuring externalities and contingent valuation, internalising external effects and environmental policy, economics of non-renewable resources, renewable resources, cost-benefit-analysis, sustainability issues, international aspects of resource and environmental problems, selected examples and case studies.
LiteraturePerman, R., Ma, Y., McGilvray, J, Common, M.: "Natural Resource & Environmental Economics", 3d edition, Longman, Essex 2003.
363-0503-00LPrinciples of Microeconomics
GESS (Science in Perspective): This lecture is for MSc students only. BSc students register for 363-1109-00L Einführung in die Mikroökonomie.
W3 credits2GM. Filippini
AbstractThe course introduces basic principles, problems and approaches of microeconomics. This provides the students with reflective and contextual knowledge on how societies use scarce resources to produce goods and services and ensure a (fair) distribution.
ObjectiveThe learning objectives of the course are:

(1) Students must be able to discuss basic principles, problems and approaches in microeconomics. (2) Students can analyse and explain simple economic principles in a market using supply and demand graphs. (3) Students can contrast different market structures and describe firm and consumer behaviour. (4) Students can identify market failures such as externalities related to market activities and illustrate how these affect the economy as a whole. (5) Students can also recognize behavioural failures within a market and discuss basic concepts related to behavioural economics. (6) Students can apply simple mathematical concepts on economic problems.
ContentThe resources on our planet are finite. The discipline of microeconomics therefore deals with the question of how society can use scarce resources to produce goods and services and ensure a (fair) distribution. In particular, microeconomics deals with the behaviour of consumers and firms in different market forms. Economic considerations and discussions are not part of classical engineering and science study programme. Thus, the goal of the lecture "Principles of Microeconomics" is to teach students how economic thinking and argumentation works. The course should help the students to look at the contents of their own studies from a different perspective and to be able to critically reflect on economic problems discussed in the society.

Topics covered by the course are:

- Supply and demand
- Consumer demand: neoclassical and behavioural perspective
- Cost of production: neoclassical and behavioural perspective
- Welfare economics, deadweight losses
- Governmental policies
- Market failures, common resources and public goods
- Public sector, tax system
- Market forms (competitive, monopolistic, monopolistic competitive, oligopolistic)
- International trade
Lecture notesLecture notes, exercises and reference material can be downloaded from Moodle.
LiteratureN. Gregory Mankiw and Mark P. Taylor (2017), "Economics", 4th edition, South-Western Cengage Learning.
The book can also be used for the course 'Principles of Macroeconomics' (Sturm)

For students taking only the course 'Principles of Microeconomics' there is a shorter version of the same book:
N. Gregory Mankiw and Mark P. Taylor (2017), "Microeconomics", 4th edition, South-Western Cengage Learning.

R. Pindyck and D. Rubinfeld (2018), "Microeconomics", 9th edition, Pearson Education.
Prerequisites / NoticeGESS (Science in Perspective): This lecture is for MSc students only. BSc students register for 363-1109-00L Einführung in die Mikroökonomie.
363-0565-00LPrinciples of MacroeconomicsW3 credits2VJ.‑E. Sturm
AbstractThis course examines the behaviour of macroeconomic variables, such as gross domestic product, unemployment and inflation rates. It tries to answer questions like: How can we explain fluctuations of national economic activity? What can economic policy do against unemployment and inflation?
ObjectiveThis lecture will introduce the fundamentals of macroeconomic theory and explain their relevance to every-day economic problems.
ContentThis course helps you understand the world in which you live. There are many questions about the macroeconomy that might spark your curiosity. Why are living standards so meagre in many African countries? Why do some countries have high rates of inflation while others have stable prices? Why have some European countries adopted a common currency? These are just a few of the questions that this course will help you answer.
Furthermore, this course will give you a better understanding of the potential and limits of economic policy. As a voter, you help choose the policies that guide the allocation of society's resources. When deciding which policies to support, you may find yourself asking various questions about economics. What are the burdens associated with alternative forms of taxation? What are the effects of free trade with other countries? How does the government budget deficit affect the economy? These and similar questions are always on the minds of policy makers.
Lecture notesThe course webpage (to be found at contains announcements, course information and lecture slides.
LiteratureThe set-up of the course will closely follow the book of
N. Gregory Mankiw and Mark P. Taylor (2017), Economics, Cengage Learning, Fourth Edition.

Besides this textbook, the slides, lecture notes and problem sets will cover the content of the lecture and the exam questions.
363-1021-00LMonetary PolicyW3 credits2VJ.‑E. Sturm, A. Rathke
AbstractThe main aim of this course is to analyse the goals of monetary policy and to review the instruments available to central banks in order to pursue these goals. It will focus on the transmission mechanisms of monetary policy and the differences between monetary policy rules and discretionary policy. It will also make connections between theoretical economic concepts and current real world issues.
ObjectiveThis lecture will introduce the fundamentals of monetary economics and explain the working and impact of monetary policy.
ContentThis lecture will introduce the fundamentals of monetary economics and explain the working and impact of monetary policy. The main aim of this course is to describe and analyze the goals of monetary policy and to review the instruments available to central banks in order to pursue these goals. It will focus on the transmission mechanisms of monetary policy, the effectiveness of monetary policy actions, the differences between monetary policy rules and discretionary policy, as well as in institutional issues concerning central banks, transparency of monetary authorities and monetary policy in a monetary union framework. Moreover, we discuss the implementation of monetary policy in practice and the design of optimal policy.
LiteratureThe course will be based on chapters of:
Mishkin, Frederic S. (2019), The Economics of Money, Banking and Financial Markets, 12th edition, Pearson. ISBN 9780134733821
Prerequisites / NoticeBasic knowledge in international economics and a good background in macroeconomics.
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