Value at Risk

This course introduces VaR and provides an up-to-date working knowledge of all aspects of VaR analysis, including the latest VaR models in theory and practice.

Target Audience

Every professional involved in the global financial services industry (as a provider, user, regulator or advisor of product/services, marketplace/exchange) would benefit from this course

Supervisory Agencies
Central Banks
Financial Institutions
Commercial Banks
Investment Banks
Housing Societies/Thrifts
Mutual Funds
Brokerage Houses
Stock Exchanges
Derivatives Exchanges
Insurance Companies
Multinational Corporations
Accountancy Firms
Consultancy Firms
Law Firms
Rating Agencies
Multi-lateral Financial Institutions
Others

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Review of Statistical Concepts

• The various statistical measures viz., measures of central tendency and measures of dispersion
• The statistical relationship between the standard deviation and confidence intervals for normal distributions
• The concept of correlation and volatility and the methods to calculate them

 

Duration: 1 hour

Value at Risk – I

• The concept of Value at Risk
• The concept of trading and banking book
• The various methodologies of estimating VaR and their strengths and weaknesses
• The comparison between the strengths and limitations of VaR

 

Duration: 125 minutes

Value at Risk – II

• The computation of VaR of foreign exchange spot, foreign exchange options positions, common shares/stocks and fixed income portfolio
• The various applications of VaR

 

Duration: 150 minutes

Application of Analytical Techniques

• The framework of analytical techniques – gap, duration, simulation and value at risk
• The concept and assumption under each technique
• The comparison and analysis of each of the techniques across various parameters
• The application of techniques with real life case studies

 

Duration: 1 hour

Regulatory Issues

• How market risk can be regulated
• The purpose of regulatory capital
• The various approaches applied to capital charges

 

Duration: 1 hour

VaR Models

• The various methods to measure value at risk such as parametric, historical simulation and Monte Carlo simulation
• The comparison among the various methods according to their characteristics, advantages and disadvantages
• The process of value at risk implementation

 

Duration: 2 hours

Stress Testing

• The concept of stress testing as a complimentary tool to value at risk analysis
• The creation of hypothetical and historical scenarios
• The implementation of stress test scenarios into market risk modeling
• The growing use of stress testing to risk managers

 

Duration: 1.5 hours

Back Testing

• The technique of backtesting
• The different types of backtesting

 

Duration: 1 hour

Risk Management Systems

• The important steps involved in the choice of risk management software vendor
• The main software solution vendors in the market; products they offer and their salient features

 

Duration: 2 hours

Case Study – Orange County

• This course deals with the Orange County case study analysis through commonly used market risk measures namely Duration and Value at Risk.
• It helps the user gain an insight into the Orange County case and comprehend the investment techniques which led to its disaster:

Duration: 1 hour

Case Study – Barings Bank

• This course deals with Barings Bank case study and analyzes how with the application of VaR measurement methodology the crisis could have been avoided.
• It helps the user understand the impact of the Kobe earthquake on Japanese equity and currency markets and also comprehend Nick Leeson?s trading operations in Singapore International Monetary Exchange (SIMEX).
• It helps the user understand how Kobe earthquake caused huge losses to Leeson?s reported and unreported positions on SIMEX and OSE:

Duration: 1 hour

Case Study – Metallgesellschaft

• This course deals with the background of Metallgesellshaft case study, the investment deals which led to the disaster and the strategies adopted by Metallgesellshaft.
• It also provides an analysis of what was amiss, and the lessons to be learnt from it.

Duration: 2 hours

Description of Advanced VaR Models

• The various emerging forms of VaR viz., Component VaR and Del VaR
• The impact of individual trades on Total VaR
• The advancements in Monte Carlo Simulation
• The variance reduction techniques employed for Monte Carlo Simulation

 

Duration: 1 hour

Advanced Measuring Volatility and Correlation

• The concept of volatility and volatility clustering
• The conditional volatility models viz., Exponential Moving Average approach and GARCH
• The importance of time errors and the impact of crashes on correlation and its effect on VaR calculation

 

Duration: 1 hour

Advanced Scenario Analysis and Stress Tests

• The application of stress testing to a group of reporting firms through aggregation
• The various techniques like Maximum Loss and Extreme Value Theory
• How systematic stress testing is used with the help of stress test matrices

 

Duration: 1 hour

Risk Adjusted Performance Measurement

• The concept and need for risk adjusted performance measurement
• Risk capital and the measures of risk capital viz., revenue (or earnings) volatility, Earnings at Risk (EaR), and asset volatility ? Value at Risk (VaR)
• The importance of capital allocation in risk adjusted performance measurement and the factors that affect them

 

Duration: 1 hour