Finance de marché

Nombre de places: 40 - Langue: Français

Objectifs

Valorisation et gestion des risques des instruments financiers dans le cadre du ""trading book"" d'un Etablissement financier

Syllabus:
Pricing & Risk management in the Trading Book, Syllabus
Laurent-Olivier VALIGNY
Global Head Valuation Risk, HSBC

1) Risk Governance
Segregation of duties: clarifying roles & responsibilities within the Firm
Setting Risk appetite: How much are we ready lo loose
Escalation: making risks visible
Communication: making risk intelligible
Regulatory environment: from light touch to “credible deterrence”

2) Valuation Risk
Accounting Fair value: did accounting rules exacerbate the 2008 financials crisis?
Regulatory prudent value: accounting for measurement unexpected uncertainty
Valuation in solvent wind down: to what extent “Fire sale value” depart from books&records?
Mark to Market vs Mark to Model: whom should we trust?
Banking Book vs Trading Book: P&L: accrual or upfront recognition?
Dynamic hedging versus Static warehousing: risk neutral or real world pricing?
One asset, multiple pricings: when strategy matters
Assets & Liabilities Levelling: is there too much subjectivity in Financials Statements?

3) Model risk
Definition(s): beyond quantitative uncertainty
A review of famous historical model failures: from 1987 portfolio insurance to 2017 flash crashes
Sources of model risks : the usual suspects (specification, calibration, resolution, approximation, interpretation, …)
Measurement: can we properly quantify model risk?
Mitigation: How to protect against model risk?
Regulatory requirements and Industry best practices: when the bar is being raised

4) Risk metrics
Sensitivities & Scenarios: establishing the risks profile of portfolios
First order greeks : how to be fooled by delta approximation
Convexity & gamma effect: second order always matters
Discontinuities&Gap risks: black swans or black holes?
Market dependency & cross gammas: the case of pay off linked to multiple risk factors
Reporting: finding the right balance between accuracy, timeliness and readability

5) Value at risk
Definition, use and misuse: the rise and fall of a magic number
Numerical examples
Regulatory usage and approval: computing capital requirement for market risk
Risk factors selections: grouping, mapping, risk bucketing…
Dynamic of risk factors: normal or log normal or something else?
Numerical resolutions: historical,variance/covariance, monte-carlo
Limitations and level of subjectivity: how accurate is Value at risk?
Back testing: how predictive is Value at risk?
Stressed VaR : when the worse come to the worst
Expected shortfall / CVaR: thinking beyond the 99th percentile

6) Stress Testing
Statistics beyond value at risk: are we more secured?
Historical stress tests: “1987 Black Monday will never happen again”
Hypothetical stress tests: “remote, unlikely but still plausible”
Adverse stress tests: thinking out the unthinkable
Calibration: devil is always in the detail
Internal vs external stress testing: when the regulators instruct

7) Credit & Counterparty Risk
Exposure at default: when hypothetical profits becomes potential losses
Probability of default: historical rating based or market implied from financial instruments?
Loss given Default: shall we wait or shall we sell the claim?
Default correlations: “the formula that killed Wall Street ”
Wrong way risk: when consanguinity matters

8) Conduct Risk
Rogue trading: never say never again
Insider Trading: the red line between market intelligence and law infringement

Evaluation

Étude de cas

Pré-requis

Statistiques, comptabilité, techniques actuarielles, (processus stochastique)

Equipe enseignante

VALIGNY Laurent-Olivier


 

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