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Stress Testing - Online Course

SKU 00009
$99.00
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About the course

This course begins with a discussion of the purpose and uses of stress testing. This is followed with a look at the framework and the different tools for stress testing. The ALM framework for stress testing net interest income and capital (market value of equity) is presented. Steps for building the ALM model are reviewed and various ALM reports are described and explained. The course concludes with an overview of the evolution of capital adequacy regulatory standards over the years.

Learning Objectives

  • Explain the need for and use of stress testing
  • Discuss & plot ranges and classification of values of a given distribution
  • Describe the different types of capitals needed to cover operations, risk & extreme scenarios
  • Identify the most likely outcomes for normal & extreme (worst case) scenarios for a given distribution
  • Discuss how results change if the period of analysis is changed and how the problem may be addressed by using the change in prices
  • Briefly explain the different tools used for stress testing (i.e. volatility/ value at risk, historical worst case price scenarios, review of analyst forecasts)
  • Outline and describe the elements of the stress testing framework
  • Discuss the ways scenarios for stress testing may be set up by changing dimensions (risk factors) such as leverage, allocation, stop loss limit, volatility, holding for market risk and ratings, downgrades, provisioning, margin/ collateral (forced sale value) for credit risk
  • Outline how the crisis plan is set up based on these risk factors
  • Illustrate a simplified example of interest rate mismatch for a bank
  • Describe the ALM framework used for stress testing
  • List the focus areas of target accounts, the drivers and settings
  • Discuss the dissemination of ALM information among the various departments of the organization
  • Define core terminology such as sigma, duration, convexity, asset/ liability sensitive, value at risk & hedging tools
  • Describe the requirements & structure of an ALM model
  • Describe ALM reports and evaluate the impact of changes in interest rate on shareholder value & net interest income
  • State the difference between the net interest income report at risk report & the earnings at risk report, and the duration gap (market value adjustment) report & capital at risk report.
  • Discuss the evolution on bank capital adequacy regulation
  • Discuss the Internal Capital Adequacy Assessment Process (ICAAP)
  • Discuss liquidity risk adjustments to Basel II standards
  • Discuss the impact of changing correlations on the calculation of overall capital

Course Details
LevelIntermediate
PrerequisitesFamiliarity with economic capital, local markets, portfolio management concepts and the Basel II framework.
Target Audience

The course is targeted at intermediate and advanced users and is aimed primarily at banking professionals who need to review stress testing material for work, professional review, audit or personal development as well as for individuals responsible for capital allocation, risk management and implementing the ICAAP framework within banks.

Advance Preparation None
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Course Guide

This course consists of seven lessons:

  1. Lesson 1 – Introduction to stress testing
  2. Lesson 2 – Stress testing capital overview
  3. Lesson 3 – Stress testing framework
  4. Lesson 4 – Introduction to Asset Liability Management
  5. Lesson 5 – Core ALM definitions & the ALM model
  6. Lesson 6 – ALM reports
  7. Lesson 7 – Overview of Capital Adequacy & ICAAP
Course Availability Online subscription is for a 30 day period only. This content will not be available after the period ends.


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