Market Risk
Description
Market risk is the potential for losses due to fluctuations in market factors such as interest rates, foreign exchange rates, and commodity prices. This type of risk has a significant impact on a broad range of financial instruments found on a bank’s balance sheet. As financial markets become increasingly complex and interconnected, the ability to identify, measure, and manage market risk is critical for maintaining financial stability and ensuring regulatory compliance.
This course begins with an introduction to the fundamental concepts of market risk, including its various types and sources. Participants will explore how changes in interest rates, currency values, and commodity prices can influence market risk and the overall financial health of an institution. The course then delves into the methods used to quantify market risk, with a particular focus on Value at Risk (VaR) models. These models provide a statistical approach to measuring the potential loss in value of a portfolio over a defined period for a given confidence interval.
Building on this foundation, the course covers practical risk management techniques that can be applied to hedge against market risk. Participants will learn about the use of derivatives, diversification strategies, and other financial instruments designed to mitigate risk. The course also examines the role of technology and data analytics in enhancing risk management practices.
A significant portion of the training is dedicated to understanding the regulatory environment surrounding market risk. Participants will gain insights into the Basel Accords, specifically Basel II and Basel III, and how these frameworks set out requirements for banks to hold capital against market risk exposures. The course explains the importance of stress testing and scenario analysis in complying with regulatory standards and in preparing for adverse market conditions.
By the end of this course, participants will be able to:
- Define and distinguish between different types of market risk, including interest rate risk, currency risk, and commodity risk.
- Utilize Value at Risk (VaR) models to measure and quantify market risk exposure.
- Implement effective risk management techniques to hedge against market risk using derivatives and other financial instruments.
- Navigate the regulatory landscape and understand the requirements of the Basel Accords related to market risk.
- Conduct stress testing and scenario analysis to anticipate and prepare for potential market disruptions.
This comprehensive training equips participants with the knowledge and skills necessary to effectively manage market risk, ensuring financial stability and regulatory compliance in an ever-evolving financial landscape.
is issued on the Luxoft Training form
Objectives
To give the audience information on what is market risk, which financial instruments generate this risk, how the market risk management is done in the investment bank, how risk factors are modelled, how market risk is calculated using VaR models, and what is current regulatory approach to market risk.
Target Audience
BAs, QAs, DEVs working in investment banking projects.
Prerequisites
Completed introductory financial markets training or possess equivalent knowledge.
Roadmap
- Introduction to Market Risk (1 hour)
- Risk Management (1.5 hour)
- Regulation (0.5 hour)
Total: 3 hours