Day 1: RISKS ARISING FROM MARKET ACTIVITIES
Introduction to market risk
- Types of market risk factors
- Sensitivity parameters of the main market instruments
- Determining risk measurement units
- Sensitivity calculation methodologies (vega and cross gamma)
Mark-to-market concept
- Overview of the various solutions for monitoring market parameters: historical estimators, totem, implicit, etc.
- Overview of methodologies for calculating mid-market and bid-offer reserves
Exercises:Devising a methodology for calculating dividend reserves
Day 2: RISK MANAGEMENT TOOLS
The most widely used risk indicators
- Stress testing and worst cases using historical and hypothetical scenarios
- Value at Risk (VaR): overview, limitations and alternatives
Explanation of Profit and Loss (P&L)
- The various effects comprising the P&L
- The various methodologies for estimating these effects: full repricing and repricing by “greeks”
Exercises: Devising a forex volatility effect calculation
Risk hedging solutions
- Hedging vanilla parameters: progressive hedging of rho, vega and delta
- Hedging exotic parameters: call vs. call and dispersion products
