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| Training > Training Courses > Risk Management
for Non- QuantsSM |
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Balancing risk and reward is the job of all managers. Unfortunately,
they may not always be successful and we have all heard of Amaranth,
Barings, Long Term Capital Management and others. International
financial regulators in conjunction with the Bank for International
Settlements (BIS) have recommended policies to minimize these occurrences
and protect investors.
This two-day program will alert participants to varieties of risk
at portfolio and enterprise level, estimating its impact, and best
practices for managing it.
| "Great
program. Delivers as advertised." |
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It is not aimed at financial engineers looking for hedging and trading
strategies, but for those managers responsible for implementing
risk systems or understanding the risk reports they are given.
It gives participants an understanding of Value at Risk (VaR) measures
and their interpretation. It is a pragmatic course aimed at practitioners
who must deal with regulators, board members or senior management.
It will assist the manager in evaluating risk adjusted performance
of staffers and profit centers. It does not require advanced mathematical
expertise, but relies on middle school algebra and basic statistical
concepts.
Several cases will be examined and implications identified. Excel
spreadsheets will be provided so that participants can review concepts
demonstrated in class. All class notes and readings are provided,
including a guide to additional sources, (i.e., books, articles
and websites).
Syllabus
Background
- What risks can we manage?
- Categorize and define market, credit,
liquidity, model and operational risk
- Importance of context in defining risk
Case: Barings Bank – How a sophisticated 22- year old
international bank was brought down. What happened, how it happened
and what lessons can we learn from their experience.
Regulatory Environment
- Why regulate? Who is being protected?
- Basel II Accord – What is it? Who created
it? Who does it impact?
- How do we satisfy its requirements - best practices?
Case: AllFirst (AIB) – How did a Maryland bank lose $650M
while under US regulation? How this case compares to Barings
and the previous lessons learned?
Value at Risk
- What is Value at Risk (VaR)? How to
calculate it for a single security
- Calculating VaR parametrically
- Aggregating VaR over different time horizons
- Excel exercise to graph volatility, calculate VaR
- Risk Adjusted Return on Capital (RAROC)
Advanced Value at Risk
- Back testing - how good is your VaR
model?
- Calculating multi-asset (portfolio) VaR
- VaR decomposition – marginal VaR to identify the impact
of changes to a portfolio
Excel exercise 2 asset VaR and VaR
decomposition
- Comparing VaR calculation methodologies
- What is Monte Carlo simulation and how is it used?
- Excel exercise to create a Monte Carlo
simulation of stock prices
Case: Baring’s revisited – What VaR would tell us
about Nick Leeson’s portfolio
Extreme Events – Worst Case Situations
- Fat tail (worse case) analysis using
GARCH and Extreme Value Theory (EVT)
- Stress testing
- Model risk
- What’s wrong with VaR?
- Multifactor Risk Models – calculating VaR using relationships
and themes
Credit Risk
- What is Credit Risk? What are the
different types?
- Estimating probability of default (PD)
- Credit rating models
- Subjective – CAMEL or the 5 C’s
- Objective – Z score, CreditMetrics, KMV, Kamakura
- Basel II capital requirements for credit
risk
- How credit default swaps work
Liquidity Risk
- Liquidity risk is the hidden killer.
Case: Long Term Capital Management – How did a firm filled
with experts and two Nobel Prize winners almost bring down the
world’s financial systems? What new lessons have we learned?
Operational Risk
- What is the BIS definition
- Categorizing op risks: Key Risk
Indicators (KRIs)
- Basel II Op Risk best practices
Wrap up, summary and sources of further information.
To register for public courses follow these links:
New
York January 9 -10, 2008
New
York January 24-25, 2007
San
Francisco March 12-13, 2007
Boston
April 23-24, 2007
New
York April 30-May 1, 2007
Chicago
June 11-12, 2007
New
York October 2-3, 2007
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