Foundation ERM Session 3: Risk measures

This presentation is based on a part of an academic course on Enterprise Risk Management (ERM) titled ‘Risk measures’ and covers topics such as: a generic (mathematical) view of risk in financial firms, Value-at-Risk (VaR) (including definition, link with capital requirements, MVaR (‘Marginal VaR’), IVaR (‘Incremental VaR’) and risk budgeting), other risk measures, coherence and merits of VaR versus TVaR (Tail VaR) / Expected Shortfall (ES)

1Session 2: Risk measures
2Session 2: Risk measures
3A generic (mathematical) view of risk in financial firms
4Loss definition
5Equity-land versus bond-land
6Session 3: Risk measures
8VaR versus Tail VaR (TVaR)
9Mathematical definitions of VaR and TVaR
10VaR estimation
11Session 2: Risk measures
12VaR closely linked to capital requirements
13VaR and expected/unexpected loss
14Session 3: Risk measures
15Marginal VaR (MVaR)
16The Gaussian Case
17Incremental VaR (IVaR)
18Risk budgeting
19Session 2: Risk measures
20Other risk measures
21Allowing for diversification
22VaR homogeneity
23Session 3: Risk measures
24Axiomatic approach
25Characterisation of coherent risk measures
26VaR is coherent for Gaussian distributions
27Advantages/Disadvantages of VaR
28Session 2: Risk measures
29VaR versus TVaR
30Arguments based on coherence
31What are the underlying mindsets?
32Which takes into account loss in the event of default?
33Different stakeholder perspectives (1)
34Different stakeholder perspectives (2)
35Treatment of illiquidity (1)
36Treatment of illiquidity (2)
37Treatment of illiquidity (3)
38Stress testing methodologies
39Important Information

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