Financial Risk Management - Methods, Tools, Principles and Regulation

Tuesday, June 11

09.00 - 09.15 Welcome and Introduction

09.15 - 12.15 Introduction to Financial Risk Management

A brief history of Risk Management
  • The Birth Of Mathematical Tools
    • Probabilities, Gaussian and non-Gaussian statistics
  • Always Larger Markets
    • Bartering, town markets, stock markets, financial markets
  • Finance and Regulation, The Mouse and The Cat
    • Quants, bubbles and systemic risks
    • Crisis and catastrophes
Risk Identification and Classification
  • Applying The Risk Framework Of Nuclear Events To Financial Risks
    • Risks that can be identified and risks that cannot
    • Risks that can be quantified and risks that cannot
  • Risk Classification
    • Is the credit, market, operational risk segmentation good enough?
    • What business models generate what risks?
    • Adapting the classification of risks to the activities of the bank

12.15 - 13.15 Lunch

13.15 - 16.30 Quantitative Techniques For Risk Measurement

Theoretical Basis Of Risk Assessment
  • Non-Statistical Approaches
    • What-if and scenario analysis
  • Statistical Approaches
    • VaR, CVar, Expected Shortfall
    • Handling correlations, GARCH, OUCH, copulas
    • The limits of the statistical approaches
Regulatory Vs. Economic Approaches
  • The Regulatory Approach
    • Basel 1, 2 and 3
    • The standardized, foundation and advanced approaches
  • The Economic Approach
    • Economic capital concepts and guidelines
    • IFRS 9
  • Articulating The Two Approaches
  • Case Study: Dexia

Wednesday, June 12

09.00 - 09.15 Recap

09.15 - 12.00 Risk Measurement

Credit Risk
  • Credit Risk Parameters
    • EAD, PD, LGD
    • Concentration, diversification and correlations
  • Credit risk Frameworks
    • Basel IRB formula, RWA credit, Basel 2/3 solvency ratios
    • Pillar 2 ICAAP, TRIM, Basel 4
    • Economic Capital and IFRS 9
  • Credit Risk Models
    • Models for Corporates: Empirical and structural types
    • Models for Retail: From scorecards to Markov chains
    • Regulatory stance on credit risk models: Basel 3 final
  • Case Study: The Sovereign Debt Crisis
Market Risks
  • Market Factors And Models
    • The greeks: Alpha, beta, gamma
    • VaR and Expected Shortfall, tail risks
  • Market Risks Frameworks
    • Market risks under Basel III
    • FRTB, Standardized Approach and IMA
    • Risk dynamics and portfolio management
  • Case Study: Credit National

12.15 - 13.15 Lunch

13.15 - 16.30 Risk Measurement (cont.)

Balance Sheet Risks
  • Measuring The Interest Rate Risk Of The Banking Book
    • Building up the interest rate gaps
    • Sensitivity and duration, embedded options, prepayments
  • Measuring Spread And Funding Risks
    • The articulation between liquidity, spread and funding risks
    • Accounting considerations
  • Assessing Liquidity
    • Liquidity gap and ratios, LCR and NSFR
  • Case study: Credit National
Other Risks And How To Aggregate All Risks
  • Assessing Operating Risks
    • Operational, business and residual risks
  • Aggregating Risks
End of day review and exercises

Thursday, June 13

09.00 - 09.15 Recap

09.15 - 12.00 Managing the risks of the bank

Risk Management in Banks
  • Organization Of The Risk Management Function
  • Expected Internal And External Disclosures
    • Regulatory disclosures
    • Accounting disclosures
    • Internal management reporting
  • Funds Transfer Pricing
    • Locating risk management in the right expertise center
    • Financial and commercial risks and margins
  • IT And Data Concerns
    • Categories of IT tools used to manage risks
    • Emerging technologies, machine learning, report teaching
Controlling Risks, Hedging And Mitigation
  • Tools For Risk Control And Mitigation
    • Limits, securitization and hedging
  • Hedging: Value And Cash Flow Hedges
    • Interest rate and credit derivatives
    • Value and cash flow hedges
    • Micro and micro hedges
  • Case Study: LTCM

12.15 - 13.15 Lunch

13.15 - 16.30 Perspectives On Risk

Risk And Finance And The Management Of The Bank
  • The management mechanisms of the bank
    • Top to bottom: Capital allocation and global limits
    • Bottom-up: Committees and Reporting
  • The Convergence Of Risk And Finance Operating Models
    • Different objectives, different cultures, different silos
    • IFRS 9 breaks the silos
  • Processes Supporting Risk-Return Type Decisions
    • RAROC or how to price risk
    • Financial planning
Current Issues
  • Regulatory Pressure And Banks Profitability
  • Sovereign and Systemic Risks
  • IFRS 9, A Game Changer
  • Fintechs and Blockchain

Seminar wrap up and final game

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