Recent Developments in Financial Risk Management

Agenda Program
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Prague, NH Hotel Prague
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Financial Risks and their Interactions
Recent Financial Crises and Disasters
Developments in Risk Management Tools
Basel II and other Regulatory Issues
Risk Management and Accounting: IAS 39 & FASB 133
Risk Management and Capital Allocation
Risk Management Policies, Reporting and Technology
The objective of this seminar is to give the participants a thorough review of state-of-the-art financial risk management. First, we give an overview of the different types of financial risk and show how they appear and interact. To illustrate this, we will look at some of the more spectacular financial failures over recent years, where financial risks have been "at large". We will then take a closer look inside the modern financial risk manager's toolbox. We will present and discuss traditional and new methods for measuring and controlling financial risk, and we will explain the use of financial derivatives and other tools for mitigating market, credit and operational risks. Next, we will take a closer look at recent regulatory developments, including Basel II and the regulatory changes implied by the EU Financial Services Action Plan. We will also discuss the impact on risk management of new accounting rules such as IAS 39 and FASB 133. After that, we will explain and demonstrate how risk management and capital allocation interrelate in the modern financial institution. We will explain how "economic capital" is calculated and used for the calculation of RAROC (Risk Adjusted Return on Capital) and we will show how this measure is used for risk pricing across business units. Finally, we will look at the "infrastructure" of risk management in a modern financial institution. We will discuss possible ways of organizing risk management functions and we will suggest a simple, yet comprehensive, set of risk management policies. We will also discuss the role of technology and we give an overview of state-of-the-art IT solutions for risk management.

Program of the seminar: Recent Developments in Financial Risk Management

The seminar timetable follows Central European Time (CET).

09.00 - 12.00  Financial Risks and their Interactions

  • Overview of Financial Risks and their Interactions
    • Market risks, credit risks, operational risks, energy and power risk, �
    • Leveraged risk and margin risk
  • Long-Term Trends
    • Deregulation of financial markets
    • Globalization of risks
    • Integration of risks
    • Securitization of risks
  • Recent Financial Crises and Disasters
    • LTCM, Enron, Parmalat, Yukos, �
  • Outlook for the Coming Year
    • Key structural risks and industry trends
    • Interest rate and exchange rate scenarios
    • Need for an integrated approach to risk management
    • Need for focus on �business risk� also

12.00 - 13.00  Lunch

13.00 - 16.30  Risk Management Tools (1): Measures of Financial Risk

  • Traditional Measures of Risk
    • Beta, duration, convexity, �
  • Measuring Asset-Liability Risk
    • Balance sheet mismatches
    • Off-balance risks
  • Measuring Liquidity and Margin Risk
  • Recent Developments in Credit Risk Measurement
  • Recent Developments in Operational Risk Measurement
  • Country Risk Analysis
  • Advanced Risk Measures
    • Value-at-Risk
    • Cash-flow at risk
    • Shortfall-Risk
    • Extreme VaR

09.00 - 12.00  Risk Management Tools (2): Management Tools

  • Overview of Risk Techniques for Risk Mitigation
    • �Internal� techniques
    • �External" techniques
  • Using Derivatives for Risk Management
    • Recent developments in futures, options and OTC markets
    • Using credit derivatives and credit linked notes
    • Weather derivatives
    • Energy and power derivatives
    • Using exotic derivatives and structured products in risk management
  • Developments in �Risk Securitization�
    • Transferring risk with assed backed securities
    • Bank securitization (CDO�s and synthetic CDO�s)
  • Other Risk Management Innovations

12.00 - 13.00  Lunch

13.00 - 16.30  Regulatory Developments

  • Overview of Regulatory Developments
  • Basel II
    • Background and status
    • 2004: Make or break for the new accord?
    • The risk measurement framework
    • The supervisory process
    • The role of market discipline
    • Important issues raised by the implementation of Basel II
    • How will Basel II impact the banking market?
  • The EU Financial Services Action Plan
    • Overview and status of the FSAP
    • How will changes to the ISD and other directives affect risk management?
  • Other Regulatory Developments

Day Three

09.00 - 12.00  Accounting Issues in Risk Management

  • Introduction and Background
  • Overview of Important Accounting Standards Related to Risk Management
  • Accrual Accounting vs. Fair Value Accounting
  • Overview of Principles in FAS133/IAS39
  • Recent and Proposed Changes to the Standards
  • Differences between FAS/IAS
  • Criteria for Use of �Hedge Accounting�
  • The Importance of �Disclosures�
  • Examples: Valuation and Fair Value Accounting for Selected Risk Management Positions
  • Some Critical Questions
    • How FAS 133/IAS 39 will affect the risk management business?
    • How FAS 133/IAS 39 will affect the use of derivatives?
    • Will reported financial performance be more volatile?

12.00 - 13.00  Lunch

13.00 - 16.00  Risk Management and Capital Allocation

  • The Role of "Economic Capital" in Modern Bank Management
  • Measuring and Allocation Economic Capital
  • Using RAROC as a Management Tool

The Infrastructure of Risk Management

  • Risk Management Policies
  • Risk Management Organization
  • IT System Requirements
  • Internal and External Data Requirements

Test: FRM/PRM Style

Evaluation and Termination of the Seminar

Training catalogue in PDF
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