Mastering Risk Management

Description

The Mastering Risk Management course is a comprehensive seminar that gives participants a clear understanding of risk: how it arises, how to measure it, and – most important of all – how to manage risk. Participants will explore and master a wide spectrum of risks, including market, credit, and operational risks.

Learning Outcomes

By attending this course, you will:

  • Obtain a thorough insight into credit and market risk management concepts and practices
  • Gain an in-depth understanding of the varied risks – both credit and market – arising from FX, swaps, futures, options, and other financial products.
  • Explore the principles used in the active hedging and risk management of derivative instruments and portfolios, and the practical problems faced by banks in managing their books.
  • Examine counterparty and credit risk issues, and the methods available to mitigate these risks
  • Develop your understanding with extensive practical examples illustrating each of the concepts covered

Who Should Attend

Anyone involved in risk management, measurement, and control.

CPD Credits

21 hours

Prerequisites

None

Seminar Content

Overview of Banking Risk
  • Definition of risk and uncertainty
  • The dimensions of risk
  • Market risk: FX, I/R, equity, commodity, basis, and volatility risks
  • Credit and counterparty risk
  • Liquidity risk
  • Operating risk – including fraud and settlement risk
  • Legal, regulatory, and political risk
  • The risk / return trade-off
Review of Statistical Concepts
  • Statistical distributions
  • Mean, variance, standard deviation, skewness and kurtosis
  • Probability distributions
  • Mastering the Normal distribution
  • Confidence intervals
  • Volatility
  • Correlation and auto-correlation
  • Calculating Volatility from Market Data
Pricing Principles for Financial Products
  • FRAs
  • Swaps
  • Options
  • Why options behave differently
  • Option pricing models – how do they work?
  • The "Greeks" for options
  • Market risk for financial products
  • Symmetrical vs. non-symmetrical products
  • Pricing Options
Overview of VaR
  • Objective of Value At Risk (VaR)
  • Establishing confidence intervals
  • Principles of calculating VaR
  • Methods of calculating VaR
  • The variance / covariance (parametric) approach
  • The Monte-Carlo risk approach
  • Using historical simulation
  • Stress-testing and scenario analysis
Implementing VaR
  • Principles
  • Choosing a confidence levels (5%?, 1%?, 0.0001%?)
  • Choosing a time horizon (1d?, 10d?, 30 days?)
  • Gathering risk data
  • Full valuation vs. parametric approaches
  • Implementing the variance / covariance approach
  • Historical simulation
  • Choosing scenarios for Monte-Carlo and stress-testing
  • Comparing methodologies
  • Verifying VaR
  • Back-testing and model validation
  • Expected Shortfall
  • Calculating VaR using the Historical Simulation approach
VaR for a Portfolio of Instruments
  • Combining and integrating risk exposures
  • Portfolio risk and correlation concepts
  • Components of portfolio risk – the Greeks again
  • Risk managing the entire portfolio
  • Additive, non-additive, and offsetting risks
  • Managing a portfolio of linear instruments
  • Managing a portfolio of non-linear instruments
  • Special problems caused by convex products
  • Correlations between interest rates, currencies, and other financial risk dimensions
  • Calculating VaR for a Banking Portfolio
The Basle Market Risk Amendment and FRTB
  • The Basle Accord for Market Risk
  • The standard model
  • Using internal models
  • Qualitative standards for internal models
  • Calculating VaR using internal models
  • The multiplier, "yellow cards", and the "red card"
  • Stress testing
  • The Fundamental Review of the Trading Book (FRTB)
  • Revised Internal Models Approach
  • Revised Standardised Approach
  • Revised boundary between trading and banking books
  • Adoption of Expected Shortfall
  • The meaning of: DRC, RRAO, ES, SES and other acronyms
  • Default risk
  • Stress testing
  • Workshop: Calculating market risk
Review of Credit Risk
  • Definition of credit risk
  • Sources of credit risk: bank lending, LCs, money market and bonds, derivatives
  • Country and counterparty risk
  • Measuring credit risk: traditional methods
  • Measuring credit risk for financial products
  • Z-score and similar statistical approaches
  • Credit ratings and methodology
Credit Risk and Credit VaR
  • Default risk and equity prices – the KMV approach
  • Determining expected default frequency (EDF)
  • CreditMetrics
  • Calculating value volatility and Credit VaR
  • Choice of time horizon for Credit VaR
  • The transition matrix
  • Estimating migration probabilities
  • Markov processes and chains
  • Modelling recovery rates and credit spreads
  • Determining correlations from equity data
  • Standalone risk vs. portfolio risk
  • Monte-Carlo methodology
  • CreditRisk+
  • Comparison of different credit models
  • Measuring Credit Risk for a Loans Portfolio
Credit Derivatives
  • Principles and functions of credit derivatives
  • Types of credit derivatives
  • Credit default swaps
  • Index products
  • Pricing CDS
  • Using CDS to reduce credit exposure
Mitigating Counterparty Risk
  • Monitoring and controlling counterparty risk
  • Netting
  • Collateral management
  • Settlement – delivery versus payment
  • Using credit derivatives to modify risk profile
Basle III and Credit Risk
  • Basel III
  • Pillars I, II, and III
  • Menu of approaches
  • Standardized vs. Internal Ratings Based (IRB) approaches
  • Foundation vs. Advanced IRB approaches
  • Tier One, Tier Two, and RWA
  • Using internal credit models
  • Allowance for credit risk mitigation
  • Use of credit derivatives
  • Collateralization
  • Operational risk
  • The Capital Conservation Buffer
  • The Countercyclical Buffer
  • Workshop: Calculating capital for credit risk
Management and Current Issues
  • Segregation of discretion and responsibilities
  • Role of senior management
  • What do the numbers really mean?
  • Limits of VaR – what VaR can and cannot achieve
  • The credit crisis and its implications
  • Global risk management
  • Risk-adjusted and capital-adjusted profit and performance measures
  • Efficient allocation of capital and risk resources
  • Examples of best practices
  • Situations to be avoided (and how)
  • Lessons to be learned from recent financial disasters
  • Risk management in the future

Dates and Locations

Date
Date(s): 10 Jun 2019 - 12 Jun 2019

Location
London

Category
Risk Management

Other Dates and Locations
Check our course schedule for alternative dates and locations where this course is offered.


   Note that the course fee of £3,120.00 already includes 20% VAT.

£3,120.00


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