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….
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…
Central Clearing
After completing this reading, you should be able to: Provide examples of the mechanics of a central counterparty (CCP). Describe the role of CCPs and distinguish between bilateral and centralized clearing. Describe the advantages and disadvantages of the central clearing…
Futures Markets
After completing this reading, you should be able to: Define and describe the key features and specifications of a futures contract, including the underlying asset, the contract price and size, trading volume, open interest, delivery, and limits. Explain the convergence…
Using Futures for Hedging
After completing this reading, you should be able to: Define and differentiate between short and long hedges and identify their appropriate uses. Describe the arguments for and against hedging and the potential impact of hedging on firm profitability. Define the…
Insurance Companies and Pension Plans
After completing this reading, you should be able to: Describe the key features of the various categories of insurance companies and identify the risks facing insurance companies. Describe the use of mortality tables and calculate the premium payment for a…
Enterprise Risk Management and Future Trends
After completing this reading, you should be able to: Describe Enterprise Risk Management (ERM) and compare an ERM program with a traditional silo-based risk management program. Describe the motivations for a firm to adopt an ERM initiative. Explain best practices…
