Foundation ERM Session 4: Market Risk

This presentation is based on a part of an academic course on Enterprise Risk Management (ERM) titled ‘Market Risk’ and covers topics such as: the definition of ‘market’ risk, statistical techniques for estimating VaR (Value-at-Risk) and TE (tracking error) including parametric, non-parametric and market-implied approaches and interaction with matrix algebra including application of principal components analysis

1Session 4: Market Risk
2Session 4: Market Risk
3What is market risk?
4Typical approaches (1)
6Typical approaches (2)
7Session 4: Market Risk
8Statistical techniques for estimating risk measures
9Session 4: Market Risk
10Parametric Approach
12Incomplete or out-of-date data
13Non-linear exposures
14Call option price
16GARCH models
17Properties of GARCH models
18RiskMetrics approach
19RiskMetrics specification
20Session 4: Market Risk
21Non-parametric approach: order statistics
22Standard errors in non-parametric approach
23Maximum Likelihood Estimation
24Log likelihood
25Desirable properties of ML estimator
26Likelihood ratio tests
27Binomial back testing
28Introducing a restriction
29Goldman Sachs VaR model
30New directions for market risk: IRC
31New directions for market risk: Stress VaR
32Session 4: Market Risk
33Market-implied risk statistics
34Session 4: Market Risk
35Interaction with matrix algebra: principal components
36Principal components - explanation or noise?
37Smaller eigenvalues/principal components
38Important Information

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