Course Category

• The various statistical measures viz., measures of central tendency and measures of dispersion
• The statistical relationship between the standard deviation and confidence intervals for normal distributions
• The concept of correlation and volatility and the methods to calculate them

Value at Risk

• The concept of Value at Risk
• The concept of trading and banking book
• The various methodologies of estimating VaR and their strengths and weaknesses
• The comparison between the strengths and limitations of VaR
• The computation of VaR of foreign exchange spot, foreign exchange options positions, common shares/stocks and fixed income portfolio
• The various applications of VaR

Application of Analytical Techniques

• The framework of analytical techniques - gap, duration, simulation and value at risk
• The concept and assumption under each technique
• The comparison and analysis of each of the techniques across various parameters
• The application of techniques with real life case studies

Regulatory Issues

• How market risk can be regulated
• The purpose of regulatory capital
• The various approaches applied to capital charges

VaR Models

• The various methods to measure value at risk such as parametric, historical simulation and Monte Carlo simulation
• The comparison among the various methods according to their characteristics, advantages and disadvantages
• The process of value at risk implementation

Stress and Back Testing

• The concept of stress testing as a complimentary tool to value at risk analysis
• The creation of hypothetical and historical scenarios
• The implementation of stress test scenarios into market risk modeling
• The growing use of stress testing to risk managers
• The technique of backtesting
• The different types of backtesting

Risk Management Systems

• The important steps involved in the choice of risk management software vendor
• The main software solution vendors in the market; products they offer and their salient features

Case Study - Orange County

• Orange County case study analysis through commonly used market risk measures namely Duration and Value at Risk.
• It helps the user gain an insight into the Orange County case and comprehend the investment techniques which led to its disaster

Case Study - Barings Bank

• Barings Bank case study and analyzes how with the application of VaR measurement methodology the crisis could have been avoided.
• It helps the user understand the impact of the Kobe earthquake on Japanese equity and currency markets and also comprehend Nick Leeson's trading operations in Singapore International Monetary Exchange (SIMEX).
• It helps the user understand how Kobe earthquake caused huge losses to Leeson's reported and unreported positions on SIMEX and OSE

Case Study - Metallgesellschaft

• Metallgesellschaft case study - analyzes how with the application of VaR measurement methodology the crisis could have been avoided.
• It helps the user understand the impact of the Kobe earthquake on Japanese equity and currency markets and also comprehend Nick Leeson's trading operations in Singapore International Monetary Exchange (SIMEX).
• It helps the user understand how Kobe earthquake caused huge losses to Leeson's reported and unreported positions on SIMEX and OSE

Description of Advanced VaR Models

• The various emerging forms of VaR viz., Component VaR and Del VaR
• The impact of individual trades on Total VaR
• The advancements in Monte Carlo Simulation
• The variance reduction techniques employed for Monte Carlo Simulation

Advanced Measuring Volatility and Correlation

• The concept of volatility and volatility clustering
• The conditional volatility models viz., Exponential Moving Average approach and GARCH
• The importance of time errors and the impact of crashes on correlation and its effect on VaR calculation

Advanced Scenario Analysis and Stress Tests

• The application of stress testing to a group of reporting firms through aggregation
• The various techniques like Maximum Loss and Extreme Value Theory
• How systematic stress testing is used with the help of stress test matrices

Risk Adjusted Performance Measurement

• The concept and need for risk adjusted performance measurement
• Risk capital and the measures of risk capital viz., revenue (or earnings) volatility, Earnings at Risk (EaR), and asset volatility - Value at Risk (VaR)
• The importance of capital allocation in risk adjusted performance measurement and the factors that affect them

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