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