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Market Risk Measurement and Management
3 Day Workshop
Introduction
The aim of this seminar is tointroduce participants to the nature of market risk and how it is measured and managed under the Basel II regulations.
Key features include:
why banks trade in the market, market instruments, market trading and the risks these activities generate
the Basel Accord and the regulation for market risk measurement, management, supervision and disclosure
an explanation of Value at Risk (VaR) the most commonly used method of measuring the market risk within a trading portfolio
best practice for market risk management and supervision.
Who should attend this seminar?
This course is intended those either new to risk management, trading and market operations, or who wish to gain an understanding of risk-based regulation and how they are applied to traded markets. It will be of use to:
risk managers and analysts
investment banking professionals
treasury professionals
balance sheet and capital managers
asset and liability managers and analysts
middle and back office personnel
internal and external auditors
it and operations professionals
regulators and supervisory professionals
business managers and team leaders
anyone new to risk management within financial services
suppliers and consultants to banks and the risk management industry.
Pre-requisites
No prior experience of risk-based management, of the Basel II Accord, or of market trading is required as this course first covers the basics before moving on to more advanced topics. However it is assumed that all delegates are familiar with common financial terms and have a basic understanding of banking and the functions of a financial institution.
Objectives
At the end of this seminar participants will have a basic understanding of:
the treatment of market risk under Basel II
the risks and features of common market instruments
the pricing and mark-to-market process
the different approaches to measuring market risk
managing market risk
capital, supervision and disclosure
Content
Day 1 – Understanding trading and market risk
Defining market risk
The Basel I Accord and the Market Risk Amendment
The Basel II Accord
What is market risk?
Specific risk
General risk
Why trade – the up side and the down side?
Trading strategies
Liquidity risk
Types of market instrument
Cash instruments
Foreign exchange - Spot and Forward
Foreign exchange swaps
Loans/deposits
Certificates of deposit
Bonds
Equities
Commodities
Derivative instruments
Forward Rate Agreements
Swaps
Options
Repo
Example/case study
Pricing and mark to market
Factors affecting an instrument price
Yield curves
Pricing foreign exchange and futures instruments
Bond pricing
Equity pricing
Options pricing and volatility
Why mark-to-market?
Mark-to-market procedures
Example/case study
Day 2 – Managing market risk and Basel approaches to measurement
Managing market risk and capital
Managing market risk strategies
Limits
Technology
What can go wrong?
Case study
Measuring capital
Economic capital
RAROC
Capitalising risk
Calculating market risk capital under Basel
Market risk in Basel I and II
Capital under Basel II
Approaches for measuring market risk capital
Risk measures
The Basel Approaches
Obtaining approval for using a measurement approach
Examples
The Standardised Approach for measuring market risk
Interest rate risk
Foreign Exchange risk
Equity risk
Commodity risk
Options
Example
Day 3 – The advanced approach to measuring market risk, supervision and disclosure
Understanding Value at Risk (VaR)
An outline of Value at Risk models
How VaR works
VaR caveats and assumptions
What VaR does not do
What are the alternatives to VaR
Examples
The Internal Model Approach for measuring market risk.
By becoming a GARP member you become part of a global community of financial risk professionals. 
