Solvay Master Classes - Financial Risk Management : Sound Principles for the Future - On demand

The typical participant will be an ambitious investment professional or analyst. This includes bond and equity analysts, pension fund advisors, risk managers, private client portfolio managers; consultants to the fund mana­gement industry and regulators. Also those responsible for the management of specific portfolios within banks, pension funds, and insurance companies, are advised to attend.

An academic or equivalent background in business, finance, or economics, and sufficient professional experience is required for enrolment. 

4 days (2:30 pm to 07:30 pm)

The programme aims at giving a comprehensive overview and analysis of modern financial risk management within a contemporary context where risk management has emerged as a basic priority for the financial industry.

The first part of the course addresses the more general aspects of risk and risk measurement, introducing financial risk as a multi-faceted concept The methodological framework for coherent risk measurement will be introduced, allowing for effective managerial tools and processes.

Sound risk management and - risk measurement as a prerequisite - is at the core of the Basel II-framework, and will be discussed, from the regulators' perspective, and as an instrumental managerial criterion for efficient capital allocation on a risk-adjusted basis.

Financial risk will be distinguished from business risk and defined within its typological classes: market risk, credit risk, operational risk and liquidity risk. The now classical symmetrical risk measurement tools - beta, tracking error, and duration - will serve as an introduction to market risk management.

The second part deals with the concepts of value-at-risk (VaR) and expected shortfall, situated within the framework of downside risk measurement. A detailed analysis is provided for the popular VaR-measure, with comment on the use of VaR as a standardized risk measurement tool. The widespread use of VaR, both by investment professionals and regulators, calls for a careful evaluation of its qualities as a reliable statistic.

Several complementing techniques will be reviewed, such as stress- and back testing but also modified VaR-versions, allowing for non-normal return-distributions and positions in derivatives.

In response to a number of incisive critical remarks on the use of VaR, the promising concept of expected shortfall will be discussed as a coherent tool for risk measurement, which makes it possible to strike a balance between the interests and concern of investors, managers, and regulators.

The third part of this course gives a comprehensive overview of modern credit risk management. Credit risks are arguably the main source of losses in the financial industry, justifying an elaborate approach of the credit risk management paradigm. A distinction is made between expected and unexpected losses, based on the notions of probability of default, loss given default and exposure at default. This approach will imply the use of credit ratings and default rates, but also allows us to emphasize on credit quality migration as a potential source of credit losses. Given the impact of credit losses on the stability of financial systems, the regulatory bodies have taken special interest in this matter, with the detailed approach of Basel I and II as a result, and this also will be discussed.

In the workshops following the second and third part of the course, the main results will be illustrated with several business cases and realistic exercises.

The fourth and final part of the course is mainly concerned with operational and liquidity risk, often referred to as the final frontier in risk management. Emphasis will be put on the operational risk management process, loss event types, and the use of near-miss data. Given the specific treatment of operational risk within the Basel II-framework, attention will be given to the aspect of regulation.

Liquidity risk management will make it possible to include the possible presence of market frictions or obstructions into previous models.

The course ends with a number of final observations and recommendations for practicing in the finance industry.

Where ?

Vrije Universiteit Brussel
Room D.1.07
Pleinlaan 2
1050 Brussels

How ?

Easily reachable by car or train. Pleinlaan, entrance 12-13.
For more details see map on
http://www.vub.ac.be/infoover/campussen
Parking space will be reserved in Buidling C-1.

Cancellation

• No charge will be applied if cancellation is made more than 2 weeks before the start of the program
• 50 % of the registration will not be refunded if cancellation occurs between 2 weeks and 1 week prior to the start of the seminar;
  the full fee will be due in case of cancellation less than one week before the start of the program
• Another colleague / participant of the same level and experience may take over in case of illness or unforeseen circumstances.

Admission requirements

The number of participants will be limited to 30.

Certificate

A certificate of attendance will be issued after completion of the course by the VUB and Febelfin Academy.