Risk Management for Non Quantitative Finance Professionals: Finance Trading Times

Risk Management for Non Quantitative Finance Professionals

In this article, we will give a brief outline of the various Risk Management aspects and topics to be covered in the Risk Management for Non Quantitative Finance Professionals. Although a full detailed course spanning over a year is required for anyone to become a master of Risk Management, but this article will provide the essential details about which all topics one should be looking for while attending a Course on Risk Management. Although it may be for quant professionals, we will also detail it for non-quant prrofessionals, as all people working on the finance and investment business are not well versed with quantitative aspects of finance and investments. Risk Management
Let's begin with the basics:
Topic No. 1: Background & Introduction to Risk Management: We start with an introduction and certain case studies leading to Risk Management.

  Review and Critique of Modern Portfolio Theory with regard to Risk Management

  Concepts of Probability and Statistics and their application to Risk Management
  

Topic No. 2: Value at Risk (VaR) Concepts and their application to Risk Management: What is VaR, why is it important, why is it useless and how it should be looked upon for Risk Management

  Portfolio Risk, Incremental and Marginal Risk

Topic No. 3: Advanced Value at Risk VaR for Risk Management: We talk about the quantitative methods like simulations and regressions

  Monte Carlo Simulation

  What is the Fat Tail and Black Swan?

  Weaknesses in VaR and how to address them
  

Topic No. 4: Regulatory Environment and needs for Risk Management:

  Basel II and Proposed Industry Regulation Requirements

  Disclosures and Measures, Sharpe Ratio calculations, etc.
  

Topic No. 5: Extreme Events that may shatter Risk Management Techniques: We always look at the AVERAGE or MEAN value and assume that it will be applicable. What we dont understand is that worst cases and extreme cases can shatter us in big way.

  Worst Case Scenarios analysis

  Back Testing and its usage in Risk Management

  Stress Testing for Risk Management models

  Extreme Value Theory (EVT)
  

Topic No. 6: Credit Risk and managing it with Risk Management: Here we introduce models which are specific to Credit Risk - something like the counterparty risk.

  Altman Z Score, Merton and Jarrow Models, Transition Models

  CDO - Collateralized Debt Obligations

  CDS - Credit Default Swaps

  Impact on Overall Markets

Topic No. 7: Multi Factor Models and their applications to Risk Management:

  Alternative Way to Identify and Manage Risk
  

Topic No. 8: Liquidity Risk and analysis within Risk Management:

  A case study about how Bear Stearns was let down because of liquidity risk
  

Topic No. 9: Operational Risk and its mitigation with Risk Management Techniques:

  Key Risk Indicators (KRI) and Control Self Assessments (CSA)
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