Estimating Market Risk Measures
After completing this reading, you should be able to: Estimate VaR using a historical simulation approach. Estimate VaR using a parametric approach for both normal and lognormal return distributions. Estimate the expected shortfall given P/L or return data. Describe coherent…
Risk Data Aggregation and Reporting Principles
After completing this reading, you should be able to: Explain the potential benefits of having effective risk data aggregation and reporting. Explain challenges to the implementation of a strong risk data aggregation and reporting process and the potential impacts of…
The Governance of Risk Management
After completing this reading, you should be able to: Explain changes in regulations and corporate risk governance that occurred as a result of the 2007-2009 financial crisis. Describe best practices for the governance of a firm’s risk management processes. Explain…
Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM)
After completing this reading, you should be able to: Explain modern portfolio theory and interpret the Markowitz efficient frontier. Understand the derivation and components of the CAPM. Describe the assumptions underlying the CAPM. Interpret and compare the capital market line…
GARP Code of Conduct
After completing this reading, you should be able to: Describe the responsibility of each GARP Member concerning professional integrity, ethical conduct, conflicts of interest, the confidentiality of information, and adherence to generally accepted practices in risk management. Describe the potential…
Introduction to Derivatives
After completing this reading, you should be able to: Define derivatives, describe the features and uses of derivatives, and compare linear and non-linear derivatives. Describe the specifics of exchange-traded and over-the-counter markets, and evaluate the advantages and disadvantages of each….
Liquidity Risk
After completing this reading, you should be in a position to: Explain and calculate liquidity trading risk via the cost of liquidation and liquidity-adjusted VaR (LVaR). Identify liquidity funding risk, funding sources, and lessons learned from real cases: Northern Rock,…
Learning From Financial Disasters
After completing this reading, you should be able to: Analyze the key factors that led to and derive the lessons learned from case studies involving the following risk factors: Interest rate risk, including the 1980s savings and loan crisis in…
Credit Risk Transfer Mechanisms
After completing this reading, you should be able to: Compare different types of credit derivatives, explain their application, and describe their advantages. Explain different traditional approaches or mechanisms that firms can use to help mitigate credit risk. Evaluate the role…
Factor Theory
After completing this reading, you should be able to: Give examples of factors that impact asset prices and describe the theory of factor risk premiums. Discuss the capital asset pricing model (CAPM), its assumptions, and how factor risk is addressed in…
