Advanced Risk Management Training Course

This course is designed to extend your practical knowledge and understanding over the breadth and depth of financial risk management as practised by institutions in today's volatile and complex markets.  Picking up where many other courses leave off, it explores the connected nature of risk across market, credit, operational, liquidity, reputational and other risks.  In particular, it looks at the techniques and methodologies employed in risk estimation and their strengths and weaknesses including their relationship to regulation and capital.  Moreover it looks at how risk is really managed (or not!) currently.

The course itself is a perfect balance of theory and practice with great emphasis on practicality and hands-on issues.  It carefully examines techniques such as value-at-risk, credit modelling, stress testing and scenarios.  It also looks at how Basel II and III impact risk and risk management, as well as risk management techniques in fund management.  Finally, it asks the question - what have we learned from the "credit crunch"?

The three days are designed to be highly interactive with examples and workshops, plus plenty of opportunity for questions and discussion with the course leader and other delegates.

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Day 1

Market Risk Management

Introduction

• What is risk management?
• Why do we need it?
• Risk management vs. risk measurement
• Risk management, regulation and capital
• What is advanced risk management?

Market Risk - Methodology

• The origins of market risk
• Sensitivities and The Greeks
• Why have limits?
• Value-at-Risk – is it any use?
• What else can we do to control risk?

Computer Based Workshop: Market risk measures

Market Risk – Stress and Scenarios

• Why do we need stress and scenario testing in addition to VaR?
• How should we do stress and scenario testing?
• Why do the regulators want to see it done?

The Division between Market and Credit Risk

• The trading vs. banking business model
• The regulatory divide
• Impact of liquidity and funding
• Market type risk in traditional banking activities
• How it all went wrong in 2008 – the credit crunch

Funding and Liquidity Risk Management

• Asset liability mis-matches in the balance sheet
• Gap analysis
• Funding alternatives – e.g. securitisation, SIVs and conduits
• Funding, asset/liability liquidity and derivative pricing/hedging – how are they all linked?

Market Risk Management for Funds

• Why do Fund Managers need different tools?
• Alpha, Beta, Sharpe Ratio, Information Ratio – what is it for?
• The impact of leverage
• Thinking like a Fund Manager's Risk Manager

Day 2

Credit Risk

• What is credit risk and how does it fit / overlap with the other risks?
• The key drivers of credit risk
• Market and credit risk together
• Measurement of credit risk

Portfolio Credit Risk

• Pricing and risk management of loan portfolios
• Estimating probabilities of default, exposure at default and loss given default
• Actuarial approaches, transition matrices
• Market-based approaches, bond spread and Merton (KMV) model
• Building a credit risk model
• Using the models to set limits and monitor risk

Workshop: Simple portfolio credit risk modelling

Managing Credit Risk

• Traditional techniques
• Securitisation and risk transfer
• Regulatory capital, Basel II and AIRB
• Measuring performance and ROC

Credit Derivatives

• How can credit derivatives be useful in managing credit risk?
• Credit default swaps, single and multiple name
• Tranche CDS
• Issues with CDS, basis, documentation
• Correlation issues
• N to default type structures

Spreadsheet Exercise: Basket products

Managing Credit Risk Collectively

Group Exercise: Based on credit office role

Day 3

The Role of Capital and the Relationship to Other Risks

• What is capital for?
• Risk and capital performance measures such as RAROC, economic and regulatory capital
• Allocating and managing capital
• Raising capital and novel capital instruments

Basel II and Further Developments

• The evolution of Basel – how did we get here?
• The framework of market, credit and operational risk capital requirements – the three pillars
• Operational risk methods – how do we build a model for AMA?
• Overall requirements and best practice

What Risks Have Been Missed?

• The role of pillars two and three in support of capital requirements
• Liquidity risk – the new focus since the credit crunch
• Intra-day and short-term risks
• Reputational and strategic risk
• Whole enterprise risk

Case Study: The demise of Lehman Brothers – what went wrong?

Risk Measures and Reporting in Major Banks

• What is done currently?
• What may have to be done?
• Discussion

Master the latest techniques to control and manage credit risk, market risk and operational risk.

Attend this highly intensive course to gain an in-depth practical insight into:

• Cutting-edge market risk methodologies
• The tools and techniques needed to measure market risk effectively
• Successful stress and scenario testing
• Effective liquidity risk management
• Practical credit risk modelling and management
• How credit derivatives can be used to manage credit risk
• The role of capital and the relationship to other risks
• The impact of Basel II – the latest developments in regulation and capital requirements in light of the credit crisis
• The lessons learned from the credit crisis