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Chap 1 - The building blocks of RM, Chap 1 - The building blocks of RM -…
Chap 1 - The building blocks of RM
Chap 1 - The building blocks of RM
Definition
Risk taking
RM
Risk
Measuring and Managing Risk
Quantitative Risk Measures
Value at Risk (VaR)
Economic Capital
Qualitative Risk Assessment
Scenario Analysis
Stress testing
Enterprise Risk Management (ERM)
Practice
Challenges
may not enough dispersed
make market more risks
overstate the financial position
not eliminate overall economic risk
RM process
Problems
Loss
Expected Loss
Unexpected Loss
Correlation risk
Risk and Reward
Types of Risk
Market Risk
prices/rates change
Interest rate risk
Equity price
General market risk
Specific risk
Foreign exchange risk
Commodity price
Credit Risk
fail to meet its contractual oblications
Default risk
Bankruptcy risk
Downgrade risk
Settlement risk
Liquidity Risk
Funding liquidity risk
Market liquidity risk
Operation Risk
Others
Legal and Regulatory Risk
Business and Strategic risk
Repuation risks
Risk factor Interactions