Basel I, Basel II and Solvency II
In this chapter, the motives behind the introduction of Basel regulations will be explained. The chapter will further explain the key risk exposures addressed and the reasons why the Basel regulations have been revised over time. In addition, there will…
Anatomy of the Great Financial Crisis of 2007-2009
After completing this reading, you should be able to: Describe the historical background and provide an overview of the 2007-2009 financial crisis. Describe the build-up to the financial crisis and the factors that played an important role. Explain the role…
External and Internal Ratings
After completing this reading you should be able to: Describe external rating scales, the rating process, and the link between ratings and default. Define conditional and unconditional default probabilities and explain the distinction between the two. Define hazard rate and…
Trading Strategies
After completing this reading, you should be able to: Explain the motivation to initiate a covered call or a protective put strategy. Describe principal-protected notes (PPNs) and explain necessary conditions to create a PPN. Describe the use and calculate the…
Measuring and Monitoring Volatility
After completing this reading, you should be able to: Explain how asset return distributions tend to deviate from the normal distribution. Explain reasons for fat tails in a return distribution and describe their implications. Distinguish between conditional and unconditional distributions,…
Regression with Multiple Explanatory Variables
After completing this reading, you should be able to: Distinguish between the relative assumptions of single and multiple regression. Interpret regression coefficients in multiple regression. Interpret goodness of fit measures for single and multiple regressions, including R2 and adjusted R2….
Risks faced by CCPs: Risks caused by CCPs
After completing this reading, you should be able to: Identify and explain the types of risks faced by CCPs. Identify and distinguish between the risks to clearing members as well as non-members. Identify and evaluate lessons learned from prior CCP…
Governance over Stress Testing
After completing this reading, you should be able to: Describe the key elements of effective governance over stress testing. Describe the responsibilities of the board of directors and senior management in stress testing activities. Identify elements of clear and comprehensive…
Basic Statistics
After completing this reading, you should be able to: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable. Interpret and calculate the expected value…
Fundamentals of Probability
After completing this reading, you should be able to: Describe an event and an event space. Describe independent events and mutually exclusive events. Explain the difference between independent events and conditionally independent events. Calculate the probability of an event for…
