Head of Operational Research Group, Crédit Agricole SA
Head of market risk and P&L analysis, Crédit Agricole CIB
Les objectifs du cours
Instructor 1 : Laurent Dahan
Instructor 2 : Xavier Bocher
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
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)
Counterparty risk for market operations: MtF, CVaR, Collateralization, margin call
Basel II Capital Requirements
Consequences of Basel III improvements for risk management
Coherent Risk Measure : Type of Risk Measures, Value-at-Risk vs. Expected Shortfall
A first approach to the computation of risk measures : Introduction to Gaussian model on a single asset, Extension to a multi-asset portfolio: the Var/Covar method, comparison with historical risk measures
Multi-factorial Models: Limits of the assets by assets approach and justification of the introduction of multi-factors models, Standard projection of a portfolio on factors for risk measure computation, Introduction to macro-economic factors (CAPM, APT, Fama French)
Volatility Modeling: Characterization of volatility clustering, Econometric models of volatility (GARCH, EWMA), Opening to stochastic model
Extreme Risks: Illustration of extreme events, Introduction to dependency structure modeling (copula), Stress-testing Models
Other Market Risks
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.
1 final exam