Enterprise Risk Management: Theory and Practice
After completing this reading, you should be able to: Define enterprise risk management (ERM) and explain how implementing ERM practices and policies can create shareholder value, both at the macro and micro levels. Explain how a company can determine its…
VaR and Risk Budgeting in Investment Management
After completing this reading, you should be able to: Define risk budgeting. Describe the impact of horizon, turnover, and leverage on the risk management process in the investment management industry. Describe the investment process of large investors, such as pension…
Rating Assignment Methodologies
p> After completing this reading, you should be able to: Explain the key features of a good rating system. Describe the expert-based approaches, statistical-based models, and numerical approaches to predicting default. Describe a rating migration matrix and calculate the probability…
The Science of Term Structure Models
After completing this reading, you should be able to: Calculate the expected discounted value of a zero-coupon security using a binomial tree. Construct and apply an arbitrage argument to price a call option on a zero-coupon security using replicating portfolios….
CVA (Part B – Wrong-way Risk)
After completing this reading, you should be able to: Describe wrong-way risk and contrast it with right-way risk. Identify examples of wrong-way risk and examples of right-way risk. Discuss the impact of collateral on wrong-way risk. Discuss the impact of…
Risk Management and Investment Management
1. Factor Theory 2. Factors 3. Alpha (and the Low-Risk Anomaly) 4. Portfolio Construction 5. Portfolio Risk: Analytical Methods 6. VaR and Risk Budgeting in Investment Management 7. Risk Monitoring and Performance Measurement (Available for AnalystPrep Premium Users; Click Here) 8. Portfolio Performance Evaluation (Available for AnalystPrep Premium Users; Click Here) 9. Hedge…
The Art of Term Structure Models: Volatility and Distribution
After completing this reading, you should be able to: Describe the short-term rate process under a model with time-dependent volatility. Calculate the short-term rate change and determine the behavior of the standard deviation of the rate change using a model…
Non-Parametric Approaches
p> After completing this reading, you should be able to: Apply the bootstrap historical simulation approach to estimate coherent risk measures. Describe historical simulation using non-parametric density estimation. Compare and contrast the age-weighted, the volatility-weighted, the correlation-weighted, and the filtered…
Observations on Development in Risk Appetite and IT Infrastructure
In this chapter, the concept of a Risk Appetite Framework (RAF) is described and its elements are identified. An explanation of a well-developed RAF’s benefits will also be given and the best practices for a firm’s Chief Risk Officer (CRO),…
Portfolio Credit Risk
After completing this reading, you should be able to: Define and calculate default correlation for credit portfolios. Identify drawbacks in using the correlation-based credit portfolio framework. Assess the impact of correlation on a credit portfolio and its Credit VaR….
