ASRM 533 – Risk Management Practices and Regulation

Course Description

Offers a comprehensive coverage of different aspects of risks and regulation of financial institutions. Topics include financial institutions and their trading, risk management frameworks, market risk, interest rate risk, liquidity risk, credit risk, operational risk, latest industry practices and regulation, including Basel and Solvency, fundamental review of trading books, scenario analysis and stress testing, etc.

Course Objectives

By the end of this course, you will be able to:

  • Apply diversification on Portfolio management.
  • Construct the efficient frontier for multiple risky assets using an excel model, create the Capital Market Line (CML) and the Security Market Line (SML).
  • Introduce the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT).
  • Define the different types of Banks, their role, their transactions and decipher the risks involved in their different operations.
  • Define the different types of Insurance companies, their products, their embedded options, their investment strategies and the risks involved in their operations.
  • Define all other financial institutions such as Pension Funds, Mutual Funds, Hedge funds and Exchange traded funds.
  • Compare their investment strategies and expense policies and the risks involved in their operations.
  • Evaluate asset prices using risk neutral evaluation.
  • Develop option pricing from the one period binomial model to multi-period binomial to continuous time Black Scholes Merton pricing method.
  • Calculate the Greeks (Delta, Gamma, Theta, Vega) and use them to hedge a portfolio against changes in interest, timing and volatility.
  • Define and calculate the value at risk (VAR) for a financial institution.
  • Calculate the conditional tail expectation called Expected Shortfall (ES).
  • Understand regulation metrics based on these risk measures.
  • Define and describe the risk environment that lead to the development of international regulatory governance for banks and financial institutions.
  • Introduce the three pillars behind Basil 2.
  • Define and describe the regulations related to insurance companies in the context of Solvency I and Solvency II.