Interest Rate Risk Management by EME Banks
After completing this reading, you should be able to: Describe the mechanisms through which changes in market interest rates affect a bank’s economic value and the key methods banks use to manage interest rate risk. Compare the methods banks in…
Artificial Intelligence and the Economy: Implications for Central Banks
After completing this reading, you should be able to: Identify and describe the risks arising from the widespread use of AI applications in the financial sector. Describe how central banks can harness AI to fulfill their policy objectives. Explain the…
Generative Artificial Intelligence in Finance: Risk Considerations
After completing this reading, you should be able to: Compare generative AI and traditional AI/ML algorithms. Explain the challenges generative AI systems pose for the financial sector, including those related to data privacy, embedded bias, model robustness, and explainability. Examine…
2023 Bank Failures, Preliminary lessons learnt for resolution
After completing this reading, you should be able to: Evaluate the Credit Suisse case and its implications for the international resolution framework. Evaluate the US bank failures of 2023 and their implications for the international resolution framework. Identify and describe…
Measuring Return, Volatility, and Correlation
After completing this reading, you should be able to: Calculate, distinguish, and convert between simple and continuously compounded returns. Define and distinguish between volatility, variance rate, and implied volatility. Describe how the first two moments may be insufficient to describe…
Hypothesis Testing
After completing this reading, you should be able to: Construct an appropriate null hypothesis and alternative hypothesis and distinguish between the two. Construct and apply confidence intervals for one-sided and two-sided hypothesis tests, and interpret the results of hypothesis tests…
Swaps
After completing this reading, you should be able to: Explain the mechanics of a plain vanilla interest rate swap and compute its cash flows. Explain how a plain vanilla interest rate swap can be used to transform an asset…
Liquidity and Reserves Management: Strategies and Policies
After completing this reading, you should be able to: Calculate a bank’s net liquidity position and explain factors that affect the supply and demand for liquidity at a bank. Compare the strategies that a bank can use to meet demands…
Derivatives
After completing this reading, you should be able to: Define derivatives and explain how derivative transactions create counterparty credit risk. Compare and contrast exchange-traded derivatives and over-the-counter (OTC) derivatives, and discuss the features of their markets. Describe the process of…
Introduction to Credit Risk Modeling and Assessment
After completing this reading, you should be able to: Explain the capital adequacy, asset quality, management, earnings, and liquidity (CAMEL) system used for evaluating the financial condition of a bank. Describe quantitative measurements and factors of credit risk, including probability…
