Laurent Dahan

head of market risk and P&L analysis, Crédit Agricole CIB

Florent Pochon

Head of Risk Management, Olympia (Fund of Hedge Funds).

Gestion des risques

Les objectifs du cours

Instructor 1 : Laurent Dahan

Instructor 2 : Florent Pochon

Part 1 : Instructor 1 (18h)
The course objective is to understand the issue of risk management. The principal ways of understanding and learning about risk are considered.
Greeks computation is used to explain the daily P/L in a normal trading environment. The VaR is used to take into account market tail events while stress testing highlights performance under extreme market conditions. In a similar measure the course attempts to present the counterparty risk for market operations. This course shows also how all these measures come within the framework of the Basel Accords (3 pillars, regulatory capital requirements...)

Part 2 : Instructor 2 (12h)
Another important issue in risk managment is to consider portfolio risk and multivariate models.

Plan du cours

Part 1

  • Introduction to Risk-Management: key concepts
  • Derivatives, hedging delta P&L, break even
  • Greeks: measures and limits
  • The VaR (parametric, Monte Carlo, historical) and Back testing
  • Stress test (hypothetic, historical, specific, extremes)
  • Liquidity risk
  • Counterparty risk for market operations: MtF, CVaR, Collateralization, margin call
  • Basel II Capital Requirements
  • Consequences of Basel III improvements for risk management

Part 2

  • Covariance and Correlation Models: Portfolio Variance and Covariance, Shrinkage, EWMA, Dynamic Conditional Correlation, Regime-switching
  • Copulas for Risk Management: Correlation pitfalls, Copula modelling approach, Risk management using copula
  • Portfolio risk management: Coherent measures of risk (VaR vs. CVaR, CDaR…), Risk budgeting (marginal, incremental, component, risk contribution), Portfolio construction applications (minimum CVaR and risk parity)
  • Other Risk Management Topics: VaR backtesting: the main test for VaR validation, Review of some key systemic risk indicators (TED spread, swap spreads, spread off-the-run/on-the-run…) 

Bibliographie

Cherubini U., E. Luciano and W. Vecchiato, 2004, Copula Methods in Finance, Wiley, 310 pages.
Roncalli T., 2009, La Gestion des Risques Financiers, Economica (2ème édition), Collection Gestion, 455 pages.
 

Examen

1 final exam