Advanced Risk Management

ADVANCED RISK MANAGEMENT

Sampling & Distribution

• Time-Series Data & Cross-Sectional Data
• Sampling
• Identification of Risk
• Central Limit Theorem
• Sampling Error
• Methods of Sampling

Volatility Estimation

• Regime Switching
• Cyclical Volatility
• EWMA
• GARCH
• Implied Volatility (IV)

Introduction to VAR

• Introduction to Risk
• Value at Risk (VaR)
• Value-at-Risk Measurement Methods
• Delta Normal VAR: Linear and Non-Linear Assets
• Delta Normal VAR for Linear Derivatives
• Delta Normal VAR for Non-Linear
• Full Valuation Method
• Historical Simulation
• Monte Carlo Simulation
• Comparison between Methods

Analysing Tails (WCS)

• Visualizing WCS
• Stress Testing
• Improving Stress Tests
• Scenario Analysis
• Unidimensional and Multidimensional Scenarios
• Various Approaches to Scenario Analysis
• Standard Portfolio Analysis of Risk (SPAN)

Greeks & Hedging Risk

• Naked and Covered Position
• Stop loss Strategy
• GREEKS – Delta
• GREEKS – Theta
• GREEKS – Gamma
• GREEKS – Vega
• GREEKS – Rho
• Summary

Foundation of RISK MODEL (Factor Model)

• Security Market Line (SML) & CAPM (Beta)
• Measures of performance
• VaR based risk adjusted measures
• Single Factor Model
• Multifactor Model
• Multifactor SML
• Arbitrage Pricing Theory (APT)
• APT vs CAPM
• Multifactor APT
• Fama French Three Factor Model

Data Aggregation Risk

• Common Issues Resulting in Data Errors

Credit Risk

• Credit Risk
• Expected Loss (EL)
• Unexpected Loss
• Economic Capital

Credit Ratings

• External Credit Rating
• Credit Rating Process
• Transition Matrices
• Internal Credit Rating
• Biases in Rating System
• Rating Agencies
• Sovereign Rating

Operational Risk

• Risk Management: A Helicopter View
• Operational Risk
• Ways to Determine Operational Risk
• Advanced Measurement Approach
• Operational Risk Management Process
• Expected Loss Vs Unexpected Loss
• Classification of Risk
• Hedging Operational and Financial Risk
• Steps of Risk Management into Practice
• Corporate Governance & Risk Management
• Committees & Risk Limits
• Roles & Responsibilities in Practice

ERM

• What is ERM?
• Benefits of ERM
• Roles of CRO
• Components of ERM
• ERM & Risk Appetite

RISK MANAGEMENT FAILURES

• Role of RM
• Mistakes in RM
• Problems with VAR

Subprime Crisis (Case Study)

• The U.S. Housing Market