Measures of Financial Risk
After completing this reading, you should be able to: Describe the mean-variance framework and an efficient frontier. Compare the normal distribution with the typical distribution of returns of risky financial assets such as equities. Define the VaR measure of risk,…
The Future Monetary System
After completing this reading, you should be able to: Identify and describe the benefits and limitations of crypto and decentralized finance (DeFi) innovations. Describe the role of stablecoins in DeFi ecosystems and differentiate among the types of stablecoins. Discuss possible…
Basel III: Finalizing Post-crisis Reforms
After completing this reading, the candidate should be able to: Explain the elements of the new standardized approach to measuring operational risk capital, including the business indicator, internal loss multiplier, and loss component, and calculate the operational risk capital requirement…
Capital Regulation Before the Global Financial Crisis
After completing this reading, you should be able to: Explain the motivations for introducing the Basel regulations, including key risk exposures addressed, and explain the reasons for revisions to Basel regulations over time. Explain the calculation of risk-weighted assets and…
Solvency, Liquidity and Other Regulation After the Global Financial Crisis
After completing this reading, you should be able to: Describe and calculate the stressed VaR introduced in Basel 2.5, and calculate the market risk capital charge. Explain the process of calculating the incremental risk capital charge for positions held in…
High-level Summary of Basel III Reforms
After completing this reading, you should be able to: Explain the motivations for revising the Basel III framework and the goals and impacts of the December 2017 reforms to the Basel III framework. Summarize the December 2017 revisions to the Basel…
Risk Capital Attribution and Risk-adjusted Performance Measurement
After completing this reading, you should be able to: Define, compare, and contrast risk capital, economic capital, and regulatory capital, and explain methods and motivations for using economic capital approaches to allocate risk capital. Describe the RAROC (risk-adjusted return on…
Range of Practices and Issues in Economic Capital Frameworks
After completing this reading, you should be able to: Within the economic capital implementation framework, describe the challenges that appear in: Defining and calculating risk measures. Risk aggregation. Validation of models. Dependency modeling in credit risk. Evaluating counterparty credit risk….
Capital Planning at Large Bank Holding Companies – Supervisory Expectations and Range of Current Practice
After completing this reading, you should be able to: Describe the Federal Reserve’s Capital Plan Rule and explain the seven principles of an effective capital adequacy process for bank holding companies (BHCs) subject to the Capital Plan Rule. Describe practices…
Option Sensitivity Measures: The “Greeks”
After completing this reading you should be able to: Describe and assess the risks associated with naked and covered option positions. Describe the use of a stop-loss hedging strategy, including its advantages and disadvantages, and explain how this strategy can…
