2️⃣CFRM 540: Risk in Financial Institutions

Theory can only take us so far. Case studies helped illuminate instances where confidence is ill-placed. Also, this course inducted me into preparing for the FRM certification.

Reading Material:

• This course closely followed the curriculum of the Financial Risk Manager (FRM) certification and its content.

This course covers risk management principles and techniques in the context of solving real-world problems in the financial services industry. This course will help the student understand not only how the models work, but also their appropriate application and limitations. The material will include technical readings and cases that apply the knowledge or motivate its application. We will cover financial and operational risk issues and modeling solutions faced in the financial services industry. We will assess common constraints and organizational structures that risk managers work within. The course will cover management and measurement of market risk, credit risk, operational risk, liquidity risk, and model risk along with related regulatory frameworks. We will put these topics in the context of several cases that motivated the need for certain risk management practices or regulations and legislations. Homework projects will utilize Excel/VBA and other tools as applicable.

1. Overview of Fixed Income Products

2. Members of Financial Markets and Risks of Each

3. Market Risk

   1. Duration

   2. Convexity

   3. Value at Risk

   4. Expected Shortfall

4. Credit Risk

   1. Secured vs. Unsecured

   2. Probability of Default, Loss Given Default

   3. Credit Value at Risk

5. Operational, Model, and Liquidity Risk

6. Enterprise Risk Management

Case Studies Covered in Class

• Long Term Capital Management

• Orange County Bankruptcy

• Fannie Mae and Freddie Mac

• Lehman Brothers

• Silicon Valley Bank

• Washington Mutual