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Training course ‘Measuring and Forecasting Volatility and Risk’

On 22-24 May, the Florence School of Banking and Finance co-organised with the Barcelona Graduate School of Economics a residential course on ‘Measuring and Forecasting Volatility and Risk’ in Barcelona.

The course enabled participants to obtain an in-depth knowledge of the state-of-the-art methodologies used to analyse volatility, correlations, networks and transmission of financial and macro time series. These tools were analysed with respect to their applications to systemic risk measurement.

The course was taught by two expert economists: Christian Brownlees, Assistant Professor at Universitat Pompeu Fabra (UPF) and Associate Research Professor of the Barcelona Graduate School of Economics, working on volatility, systemic risk and network models, and Fabio Canova, Professor of Macroeconomics at the BI Norwegian Business School, Director of Training of the Florence School of Banking and Finance, Research associate with the Centre for Applied Macroeconomics and Petroleum Studies and the Centre for Economic Policy Research.

Classes began with an overview of dynamic volatility modelling methods, such as the autoregressive conditional heteroskedasticity (ARCH) and the generalized autoregressive conditional heteroskedasticity (GARCH) models, followed by a session on dynamic correlatio modelling. The second day, instructors focused on systemic risks introducing CoVaR, MES and SRISK, to provide a measure of the exposure of a given financial institution to aggregate tail shocks in the financial system. The last day, the course was closed by sessions on networks (discussing connectedness and systemicness and VAR-based measures) and spillovers in a large scale system (shrinkage approaches and machine-learning algorithms). The theoretical lessons were complemented by practical sessions, where the methodologies discussed were applied in practice on real datasets, using the BEAR toolbox in the Matlab software.

The course was attended by a representation of national banks, including both European and non-european ones, as well as EU institutions such as the European Banking Authority and the European Central Bank and academic institutions.