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FINANCIAL MARKET COURSES

Market Risk – Identification & Measurement

Market risk is the risk that the value of an institution’s positions may rise/fall due to changes in the market value of financial instruments. This may take the form of gains/losses arising from traded or non-traded positions. There are many influences on market positions, but the key drivers are interest rates, equity prices, foreign exchange rates, and commodity prices.

 

This course addresses some key issues associated with market risk in banking institutions: Where does it come from? How can it be measured? What are the difficulties associated with such measurements? A subsequent course will look at how market risk can be managed and the regulatory context associated with this form of risk.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Identify the typical sources of market risk for a financial institution

    Describe the different types of measurement used for the various forms of market risk

  • COURSE OUTLINE

    Topic 1: Identifying Market Risk

    What is Market Risk?

    Disentangling Market Risk

    Market Risk – Instruments

    o Bonds

    o Equities

    o Foreign Exchange

    o Commodities

    o Derivatives

    • Interest Rate Derivatives

    • Credit Derivatives

    • FX Derivatives

    • Commodity Derivatives

    o Correlations

    Topic 2: Measuring Market Risk

    Position Amounts and Sensitivities

    Marking to Market

    Fair Value

    Bonds

    o Duration

    • Portfolio Duration

    • Problems with Duration

    Equities

    o Beta

    Options

    o Greeks

    Gross Market: Value at Risk (VaR)

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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