Risk Culture
After completing this reading, you should be able to: Carry out a comparison between risk culture and corporate culture and explain how they interact. Explain the factors that influence a firm’s risk culture and corporate culture. Describe methods of measuring…
Assessing the Quality of Risk Measures
After completing this reading, you should be able to: Describe the ways through which errors can be introduced into models. Explain how model risk and variability can arise through the implementation of VaR models and the mapping of risk factors…
Liquidity Transfer Pricing: A Guide to Better Practice
After completing this reading, you should be able to: Discuss the process of liquidity transfer pricing (LTP) and identify best practices for the governance and implementation of an LTP process. Discuss challenges that may arise for banks during the implementation…
Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques
After completing this reading, you should be able to: Discuss how asset-liability management strategies can help a bank hedge against interest rate risk. Describe interest-sensitive gap management and apply this strategy to maximize a bank’s net interest margin. Describe duration gap…
Covered Interest Rate Parity Lost: Understanding the Cross-Currency Basis
After completing this chapter, you should be able to: Differentiate between the mechanics of FX swaps and cross-currency swaps. Identify critical factors that affect the cross-currency swap basis. Assess the causes of covered interest rate parity violations after the financial…
Managing Nondeposit Liabilities
After completing this reading, you should be able to: Differentiate the various sources of non-deposit liabilities at a bank. Describe and calculate the available funds gap. Discuss the factors affecting the choice of non-deposit funding sources. Calculate the overall cost…
Capital Structure in Banks
After completing this reading, you should be able to: Evaluate a bank’s economic capital relative to its level of credit risk. Identify and describe important factors used to calculate economic capital for credit risk: the probability of default, exposure, and…
What is ERM?
After completing this reading, you should be able to: Describe enterprise risk management (ERM) and compare and contrast differing definitions of ERM. Compare the benefits and costs of ERM and describe the motivations for a firm to adopt an ERM…
Validating Rating Models
After completing this reading, you should be able to: Explain the process of model validation and describe the best practices for the roles of internal organizational units in the validation process. Compare qualitative and quantitative processes to validate internal ratings…
Default Probability, Credit Spreads and Funding Costs
For credit valuation adjustments (CVA) and debt valuation adjustments (DVA) in the qualification of counterparty risk to be defined comprehensively, default probability and recovery rates associated with those are required. Relevant funding costs that are required when a position is…
