Part 2
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
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 historical…
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….
The Credit Transfer Markets and Their Implications
After completing this reading, you should be able to: Discuss the flaws in the securitization of subprime mortgages prior to the financial crisis of 2007-2009. Identify and explain the different techniques used to mitigate credit risk and describe how some…
Correlation Basics: Definitions, Applications, and Terminology
After completing this reading, you should be able to: Describe financial correlation risk and the areas in which it appears in finance. Explain how correlation contributed to the global financial crisis of 2007 to 2009. Describe how correlation impacts the…
Capital Modeling
In this chapter, we provide a comparison of the standardized approach, the alternative standardized approach, and the basic indicator approach for the computation of the operational risk capital charge. The modeling necessities for a bank to apply the advanced measurement…
Basel I, Basel II and Solvency II
In this chapter, the motives behind the introduction of Basel regulations will be explained. The chapter will further explain the key risk exposures addressed and the reasons why the Basel regulations have been revised over time. In addition, there will…
Performing Due Diligence on Specific Managers and Funds
After completing this reading, you should be able to: Identify reasons for the failures of funds in the past. Explain elements of the due diligence process used to assess investment managers. Identify themes and questions investors can consider when evaluating…
