Risk Management For Financial Institutions

Overview

The past is littered with prime examples of when risk management goes wrong – the sub-prime crisis, the collapse of Lehmans and the fraud committed by Jerome Kerviel.  This extensive three day course starts by looking at the lessons that can be gained from these historic examples, and the implications today for managing risk at both a firmwide and desk level. After gaining a tool kit of practical techniques, the delegates will then learn how to apply these in a variety of risk management situations.  This includes describing market risk with greeks, as well as combining risk across traders and trading desks to produce meaningful risk reports.  This is then extended into an analysis of the process of setting and monitoring risk limits.

Market and Credit risk form the mainstay of risk management within many financial institutions.  To explore these further the concepts of VaR and expected shortfall are introduced with a focus on the interpretation of these common risk measures.  Advantages and problems with different methods of calculation of VaR and expected shortfall are considered in some detail.  This moves on to consider risk management in times of crisis including scenario risk management and stress testing.  The credit section includes understanding the drivers of credit risk and credit markets, recovery and the probability of default, and finally the complexities introduced by structured credit products.

In recent years there has been an increased focus on Counterparty, Liquidity and Operational Risk. This course covers current best practice in counterparty risk management including setting exposure limits, potential future exposure and wrong way risk.  Liquidity risk is broken down into market liquidity and funding liquidity. Techniques are explored to measure these risks and manage exposures during periods of market stress.  Finally the issue of operational risk is covered.  Consideration is given to the different sources of operational risk, and techniques that can be used to measure and minimize this frequently forgotten risk class.