Lecture Notes in Risk Management {team-IRA]

Contents
Preface
About the Authors
Acknowledgments
Chapter 1 Introduction
	1.1. Historical Milestones in Financial Risk Management
		1.1.1. Conclusion
	1.2. Basic Concepts: Certainty, Uncertainty, Risk and Exposure
	1.3. Identifying Risks
	1.4. Measuring Risk
	1.5. Risk Mitigation
		1.5.1. Risk reduction
		1.5.2. Managing the consequence
		1.5.3. Example: Risk mitigation in the event of a car accident
	1.6. Risk Management
		1.6.1. The risk management process
		1.6.2. Concluding exercise
Chapter 2 Market Risk: Part I
	2.1. Trading in Financial Markets
		2.1.1. Markets
		2.1.2. Long and short
		2.1.3. Financial derivatives
	2.2. Market Risk
		2.2.1. Definition
		2.2.2. Risk factors
		2.2.3. Measurement
			2.2.3.1. Preliminary calculations
			2.2.3.2. Standard deviation
			2.2.3.3. Skewness
			2.2.3.4. Kurtosis
			2.2.3.5. Maximum drawdown
			Market Risk: Part II
			2.2.3.6. Value at risk
				2.2.3.6.1. Historical method
				2.2.3.6.2. Analytical method
				2.2.3.6.3. Monte Carlo simulation method
				2.2.3.6.4. Applications, advantages and disadvantages of value at risk
			2.2.3.7. Measures of risk and return
			2.2.3.8. CAPM
			2.2.3.9. Greeks
			2.2.3.10. Stress, scenario and sensitivity testing
				2.2.3.10.1. Stress testing
				2.2.3.10.2. Scenario testing
				2.2.3.10.3. Sensitivity testing
		2.2.4. Market Risk Management
		2.2.5. Capital Allocation
Chapter 3 Credit Risk
	3.1. Credit
	3.2. Credit Risk
	3.3. Main Credit Risk Parameters
		3.3.1. Probability of Default (PD)
		3.3.2. Exposure at Default (EAD)
		3.3.3. Loss Given Default (LGD)
		3.3.4. Collateral
		3.3.5. Term to Maturity, M
		3.3.6. Expected Loss (EL)
	3.4. Measurement
		3.4.1. Scoring
			3.4.1.1. Score card
			3.4.1.2. Altman’s Z-score
		3.4.2. Profiling methods
		3.4.3. Credit VaR
		3.4.4. Merton’s option pricing model
		3.4.5. Binary regression
		3.4.6. Stress testing, scenarios and sensitivity testing
		3.4.7. Credit risk management
			3.4.7.1. Capital adequacy
Chapter 4 Liquidity Risk
	4.1. Liquidity
	4.2. Liquidity Risk
		4.2.1. Central bank liquidity risk
			4.2.1.1. Measurement
		4.2.2. Funding liquidity risk
			4.2.2.1. Measurement
		4.2.3. Market liquidity risk
			4.2.3.1. Measurement
				4.2.3.1.1. Bid–ask spread
				4.2.3.1.2. Turnover rate
				4.2.3.1.3. Market efficiency coefficient
				4.2.3.1.4. Excel
				4.2.3.1.5. Conclusion
	4.3. Capital Allocation
Chapter 5 Interest Rate Risk
	5.1. Interest
	5.2. Interest Rate Risk
		5.2.1. Repricing risk
		5.2.2. Yield curve risk
			5.2.2.1. Parallel shift in yield curve
			5.2.2.2. Change in yield curve slope
			5.2.2.3. Isolated movement in the yield curve
		5.2.3. Basis risk
		5.2.4. Derivatives risk
	5.3. Measurement
		5.3.1. Exposure
			5.3.1.1. Exposure according to financial instruments
			5.3.1.2. Division by time segments
		5.3.2. Sensitivity
		5.3.3. Loss
		5.3.4. Simulation
			5.3.4.1. Modified duration
			5.3.4.2. Excel
	5.4. Capital Allocation
		5.4.1. Term to maturity
		5.4.2. Modified duration
		5.4.3. Derivatives
Chapter 6 Operational Risks
	6.1. Operations
	6.2. Operational Risk
		6.2.1. Risk factors
		6.2.2. Identification and classification
	6.3. Measurement
		6.3.1. Exposure
		6.3.2. Expert opinion
		6.3.3. Statistical methods
			6.3.3.1. Background
			6.3.3.2. Distribution of operational losses
			6.3.3.3. Estimating the distribution of operational losses
	6.4. Operational Risk Management
	6.5. Capital Allocation
		6.5.1. Basic indicator approach
		6.5.2. Standardized approach
		6.5.3. Advanced measurement approach
		6.5.4. Strengths and weaknesses of the various approaches
	6.6. Specific Topics Pertaining to Operational Risks
		6.6.1. Compliance
		6.6.2. Money laundering and terrorism financing
		6.6.3. Embezzlement and fraud
		6.6.4. Financial crime
			6.6.4.1. Background
			6.6.4.2. Data
			6.6.4.3. Areas of focus in the fight against financial crime
			6.6.4.4. The challenges of detecting financial crimes
			6.6.4.5. Responding to the challenges
				6.6.4.5.1. Business rules
				6.6.4.5.2. Anomaly identification
				6.6.4.5.3. Advanced analytics
				6.6.4.5.4. Text mining
				6.6.4.5.5. Data warehouse searches
				6.6.4.5.6. Network analysis
			6.6.4.6. Conclusion
Chapter 7 Additional Risks
	7.1. Background
		7.1.1. Financial irregularities risk
		7.1.2. Strategic risk
		7.1.3. Reputational risk
		7.1.4. Sector risk
		7.1.5. Project risks
		7.1.6. Regulatory risk
		7.1.7. Cyber risks
		7.1.8. Country risk
		7.1.9. Environmental risks
	7.2. Insurance Risks
		7.2.1. Background
		7.2.2. Insurance risks
			7.2.2.1. Pricing risk
			7.2.2.2. Underwriting risk
			7.2.2.3. Calamity risk
			7.2.2.4. Investment risk
			7.2.2.5. Longevity risk
Chapter 8 Enterprise Risk Management
	8.1. Introduction
	8.2. Enterprise Risk Management
		8.2.1. COSO
			8.2.1.1. Objectives
			8.2.1.2. Organizational structure
			8.2.1.3. Elements of enterprise risk management
		8.2.2. Risk mitigation decision-making model
		8.2.3. Lines of defense
		8.2.4. Reporting
		8.2.5. Risk management systems
		8.2.6. Cyber risks
	8.3. Conclusion
Bibliography
Index