Mastering Risk Management

  Intermediate CPD: 21 hours   3 days   Live


Mastering Risk Management

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.



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
  • computer 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
  • computer 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
  • computer 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
  • computer Calculating VaR for a Banking Portfolio
Basel Capital Requirements for Market Risk – the FRTB
  • The Fundamental Review of the Trading Book (FRTB)
  • Boundary between trading and banking books
  • The Standardised Approach
  • The Internal Models Approach
  • Adoption of Expected Shortfall
  • The meaning of: DRC, RRAO, ES, SES and other acronyms
  • Default risk
  • Stress testing
  • computer 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
  • computer 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
  • computer 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
Basel Capital Requirements for Credit and Operational Risk
  • Tier One, Tier Two, and RWA
  • Pillars I, II, and III
  • Standardised (SA) vs. Internal Ratings Based (IRB) approaches
  • Foundation vs. Advanced IRB approaches (F-IRB vs. A-IRB)
  • Using internal credit models
  • PD, EAD, and LGD
  • Allowance for credit risk mitigation: collateralisation and credit derivatives
  • Operational Risk
  • Counterparty Credit Risk (CCR)
  • Credit Valuation Adjustment (B-CVA, SA-CVA)
  • Securitisation (SEC-SA, SEC-ERBA, and SEC-IRBA)
  • Large Exposures
  • The Capital Conservation Buffer (CCB)
  • The Countercyclical Buffer (CCyB)
  • Capital and Leverage ratios
  • Capital floors
  • Step-in risk
  • Key changes from Basel III to Basel IV
  • computer 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

When and Where
   8 Jul 2024 - 10 Jul 2024
   Risk Management

Other Dates and Locations
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