Special Topics in Risk Management of Banking and Financial Markets
3 – 4 hours per week
Course Information
Course Length   : 3 weeks
Estimated Effort : 3 – 4 hrs per week
Course Overview
In this advanced course, part of the Professional Certificate program ‘Risk Management in Banking and Financial Markets’, we will look at structured financial products such as Asset Backed Securities (ABS), Residential Mortgage Backed Securities (RMBS), Credit Default Swaps (CDS), Collateralized Debt Obligation (CDO) and their role in transferring/diversifying the risks to several entities in the financial markets.
We will also examine the unintended consequences and outcome of those risk transfer instruments that accentuated the systemic risk and eventually lead to the 2008 global financial meltdown.
In addition, we will look at special topics in risk management such as Value at Risk (VaR) and stress testing, as well as recent trends in regulation including the Basel-III guidelines on capital adequacy that have been implemented in several countries to manage risk in a proactive and consistent manner. More importantly, we will examine how far have those regulatory measures and guidelines been able to achieve the well-intentioned goal of safeguarding the stability of financial systems across countries and whether they would, in the future, be able to anticipate and avert cascading adverse outcomes as witnessed in the 2008 global financial crisis. This course is part of IIMBx’s Professional Certificate program ‘Risk Management in Banking and Financial Markets’.
Course Key Takeaways:
- The basic attributes and structure of Asset Securitization
- Various types of asset-backed securities such as Residential Mortgage Backed Securities (RMBS), Credit Card Securitization, etc.
- Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO) and their role in managing (sometimes, augmenting) risks in any financial system
- How to measure, analyse and proactively manage the degree of risk embedded in the financial assets portfolio of any entity, using various tools and techniques such as ‘Value at Risk’ (VaR), ‘Stress Testing’ and similar guidelines issued by the Bank of International Settlement (BIS) and other regulatory bodies
- How well could the Basel-III guidelines on capital adequacy: (a) achieve the well-intentioned goal of safeguarding the stability of financial systems across countries and (b) anticipate / avert cascading adverse outcomes as witnessed in the global financial crisis of 2008
Professor PC Narayan
Finance and Accounting
Indian Institute of Management Bangalore (IIMB).
Course Syllabus
Week 1: Asset Securitization and Credit Derivatives
- Overview and Planner for Week 1
- Asset Securitization: An Overview
- Asset Securitization: Basic Attributes, Cash Flows and Structuring
- Asset Securitization: Payment Structure
- Asset Securitization: Credit Rating and Credit Enhancements
- Types of Securitization: Residential Mortgage Backed
- Securities (RMBS) and Credit Card Securitization
- Credit Enhancements Using Credit Default Swaps (CDS)
- Collateralized Debt Obligations (CDOs)
- Summary and Additional Readings
- Quiz Time: Weekly Graded Assessment 1
Week 2: Value-at-Risk and Stress Testing
- Overview and Planner for Week 2
- Value-at-Risk: An Overview
- Computing Value-at-Risk Using Historic Simulation
- Computing Value-at-Risk Using Monte Carlo Simulation
- Computing Value-at-Risk Using Delta Normal Valuation
- Expected Shortfall (Conditional Value-at-Risk)
- Back Testing Value-at-Risk
- Quantifying Volatility in Value-at-Risk Models
- Stress Testing
- Reverse Stress Testing
- BIS Requirement and Stress Testing Guidelines
- Summary and Additional Readings
- Quiz Time: Weekly Graded Assessment 2
Week 3: Global Financial Crisis and Basel Guidelines
- Overview and Planner for Week 3
- 2008 Financial Crisis: Genesis and Consequences
- Basel II Guidelines for Capital Adequacy
- Basel II.5 (Extension to Basel II)
- Basel III Guidelines: A Critical View
- Basel IV Guidelines: An Outlook
- Summary and Additional Readings
- Quiz Time: Weekly Graded Assessment 3
We want this to be an engaging learning experience for you. Keeping that in mind, the course is designed to include a mix of videos, quizzes, discussions and additional resources.
Participants should have gained, either through formal education or through work-experience or by attending the first four courses’ in this Professional Certificate program:
- A good understanding of the concepts and theories underlying banking and financial markets such as Time Value of Money, Pricing of Bonds and Equity Stocks, Theory and Structure of Interest Rates, etc.
- Structure and functioning of Short-Term and Long-Term Financial Markets.
- Tools and techniques to manage the various types of risk (such as credit risk, interest rate risk, foreign exchange risk, liquidity risk, etc.) embedded in any financial system.
- A good understanding of probability and statistics, covering measurement of central tendencies (mean, median, mode, standard deviation), statistical distributions, correlation, and regression, etc. will significantly help in the learning.
Executives, students pursuing post graduate and anyone who wants to upskill themselves in the field of Economics and Finance
Detailed examples on capital requirements of Basel III/IV, Very good course!!! Thank you very much! Very clear and precise explanations with great support of slides. More detailed examples for the calcuation parts would be useful.Very good course!!! Thank you very much! Very clear and precise explanations with great support of slides. More detailed examples for the calcuation parts would be useful.
(Anonymous)