Content and Objectives
Construction of different financial models and analysis of their application
and uses
· Risk definition - what is risk?
· What is financial risk? How does it arise?
· How is risk managed? Model, market, operational and credit risk.
· Risk models - VaR, credit risk models, problems and possible solutions
· The Basel Accords - what are they, why are they important, how
do they contribute to the measurement of risk?
On completion of this 2-day training program delegates will be able
to:
· Understand different types of financial risk
· Assess the impact of risk on various instruments in the banking
book or trading book
· Acknowledge the importance of financial risk and identify processes
to limit risk
· Incorporate risk, sensitivity, optimisation and forecasting into models
· Understand the significance of the Basel Accords and their contribution
to best practice in risk measurement and management.
Programme
DAY ONE
Introduction and Overview
· Overview of the course
· Financial risk
· Brief overview of the manifestation of financial risks
· Introduction to market risk, operational risk, credit risk and mode
risk
· Exercise - Model review (Chaos, Challenger, Mars probe. Model
risk)
Market Risk
· Where and how does market risk originate?
· How is market risk measured?
· Understanding volatility and correlation and how these are measured
· How is market risk managed? VaR
· Some examples - including some worked Excel examples
· Exercise - Constructing a VaR model using techniques described
in the course
DAY TWO
Credit Risk and simulation
· Understanding credit risk
· Building a simulation model
· Monte Carlo simulations
· Modelling and understanding credit losses
· Understanding credit correlations
· Exercise - Building a credit loss model in Excel
Operational risk and model risk
· Understanding operational risk
· Building operational risk models
· Understanding model risk
· The Basel II accord - how does the regulator view risk?
· What went wrong in the current credit crisis?
· Exercise - operational risk models in Excel, modelling the tails of
distributions, model risk examples, Basel equations and modelling
in Excel
