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Finance Training Course – Course Outline – Value at Risk

This intermediate level workshop serves as a Value at Risk refresher and reviews intermediate topics and implementation issues related to Value at Risk.

1. COURSE OBJECTIVES

At the end of this workshop the participants will be able to:

  1. Assess the impact of methods and parameter choices on VaR number.
  2. Translate VaR numbers into capital charge requirements.
  3. Evaluate the magnitude of capital savings or additional capital requirements by comparing standardized approach capital charge with VaR based capital charge using local market data.
  4. Extend the VaR framework for economic capital calculations.

2. TRAINING COURSE LEVEL

Intermediate and advance users. This advance level workshop is aimed at individuals responsible for capital allocation and risk management within banks, insurance companies and mutual funds.

3. TRAINING WORKSHOP PREREQUISITES

Familiarity with economic capital, local markets, portfolio management concepts and the Basel II framework. All participants are requested to arrange Laptops with a functional version of Microsoft Excel.

4. COURSE OUTLINE

Session & TitleTopics
Session 1:
9 Concepts in 90 minutes
Introduction. Course objectives. Format.
Statistical distributions.
Fat Tails and asymmetry. Volatility.
Return series. Log normal returns.
Market data and adjustments to fixed income and capital markets data.
Probabilities and applications.
Session 2 :
Value at Risk Debate
The Nassim Taleb versus Philippe Jorion debate.Comparing Historical Simulation, Variance Covariance, Monte Carlo simulation. Results and trends from local market data. Full Valuation versus Delta Normal models. Value at Risk for Fixed Income instruments.The Duration and Convexity adjustment.
Session 3: VaR
Applications
Value at Risk interpretation.
Value at Risk, Basel II and Economic capital.
The VaR to capital charge transformation. Unexpected loss. Risk budgeting.
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