Course Description
The Course will provide a brief overview of the financial risk management practices in place in modern financial institutions and describe the evolutions from a developmental perspective. It will concentrate on identifying and quantifying an institutions risk appetite and a case study will challenge participants to apply these concepts in a situation depicted from the "real world.
Further, the course will dive into the complexities of managing risks for various asset management functions and apply
consacrated measures to assess risk and return from an investors and a regulators perspective. Specifically, risks of derivative contracts will be analyzed separately and participants will be challenged to derive appropriate
risk reports for a derivatives book via a dedicated case study.
Given the importance and specifics of the hedge funds industry, the course will dedicate a separate section for risk analysis in this industry class. Regulatory developments under way will be discussed and potential impacts will be assessed for the risk metrics employed for hedge funds and funds of hedge funds.
A last section will be dedicated to operational risks and the course will
Focus on best practice means of assessing such risks, especially focusing on
forward looking measures such as objective early warning systems.
_ Overview of Financial Risk Management Practices
_ Risk and Compliance Reporting for Investment Funds
_ Portfolio Risk Management
_ Measuring the Performance of Internationally
_ Diversified Portfolios
_ Overview of Financial Derivatives
_ Portfolio Risk Management Using Derivatives
_ Risk Management of Hedge Funds
_ Funds of Hedge Funds
_ Portfolio of Hedge Funds Style Drifts
_ Operational Risk Management
Course Objective
Module 1
_ Overview of financial risk management practices
Risk identification
Corporate governance
Regulatory framework (specific for the asset management segments)
Market risk
Credit risk
Operational risk
Other risks
Limit systems congruent with risk appetite
Case study on defining a fund΄s inherent risk appetite
_ Risk and compliance reporting for investment funds
Regulation and reputational risk
Role of the regulator
Reporting requirements
Compliance issues
MIFID implications
_ Asset Allocation
Global vs. tactical asset allocation
Optimization approaches
Portfolio insurance
Stress testing portfolio insurance
Currency decisions
_ Portfolio risk management
CAPM and applications to asset management
Performance measurement and
risk adjusted performance attributions
The Zero Beta model & Brennan΄s model
Merton΄s continuous time Version
Case study on optimal asset allocation under currency uncertainty Managing Risk in Asset Management -
The Treynor measure
The Sharpe measure
Jensen΄s Alpha
Relationships between various measures
The tracking error the information ratio
The Sortino ratio
Recent developments and best practice refinements:
The Morningstar rating system
The actuarial approach
VAR based analysis
Taking management style into account
_ Timing analysis
The Treynor and Mazuy method
The Henriksson methods
Decomposition of Jensen΄s measure and
Tiing evaluation
_ Measuring the performance of internationally diversified portfolios
The international asset pricing model
The McDonald model
Pogue, Solnik and Russelin΄s model
Limitations and criticisms
Module 2
_ Overview of financial derivatives
Forwards and futures
Interest rate, currency and equity swaps
Options
Credit derivatives
Use of derivatives in funds
Controlling the use of derivatives in funds Compliance issues
- Portfolio risk management using derivatives
Role of derivatives hedging
Static vs. dynamic replication
Use of futures contracts
Option related hedging
Portfolio insurance as a hedging strategy
Risk management of funds with derivatives
Case study
Risks of structured products
Case study: portfolio of fixed income securities and derivatives to be evaluated against a benchmark. Special issues:
Hedge efficiency
Basis risk evaluation
Setting a Limit framework
_ Risk management of hedge funds
Equity hedged strategies
Long/ short equities
Market Neutral
Market timing
Relative Value strategies
Convertible arbitrage
Static returns
Gammatrading
Pricing inefficiencies
Fixed income arbitrage
Volatility arbitrage
Capital structure arbitrage
Event driven strategies
Merger arbitrage
Distressed securities
Regulation D
Global macro strategies
Managed futures
Systematic strategies
Discretionary strategies
Risk perspective of hedge funds strategies
The due diligence process
Case study: analysis of a hedge fund and assessing its suitability for a pension fund
Module 3
_ Funds of hedge funds
Industry overview
Portfolio management strategies
Style risks and diversification the selection of strategy sectors
The due diligence process funds of hedge funds (applied example)
Defining and managing portfolio risk
Transparency (emerging regulatory trends)
Active risk management & liquidity concerns
_ Portfolio of hedge funds style drifts
Definition and importance
Detection, monitoring
and control
Performance attribution and risk exposure
Peer Group analysis
Applied examples
_ Operational risk management
Importance
Approach
Operational risk framework
Reporting and audit
Key risk indicators
Operational risk capital can funds learn from banks?
Course Certificate
ECOMAN certificate will be issued to all attendees completing
minimum of 75% of the total tuition hours of the course.
Who Should attend?
The course will be of value to professionals in the following areas:
_ Directors & senior managers of asset management companies
_ Risk managers
_ Compliance officers
_ Pension fund managers/trustees
_ Institutional investors
_ Corporate
treasurers
_ Regulators & lawyers
_ Portfolio managers
_ Directors & senior managers of insurance companies
_ Private investors
Course Outline
Module 1
_ Overview of financial risk management practices
Risk identification
Corporate governance
Regulatory framework (specific for the asset management segments)
Market risk
Credit risk
Operational risk
Other risks
Limit systems congruent with risk appetite
Case study on defining a fund΄s inherent risk appetite
_ Risk and compliance reporting for investment funds
Regulation and reputational risk
Role of the regulator
Reporting requirements
Compliance issues
MIFID implications
_ Asset Allocation
Global vs. tactical asset allocation
Optimization approaches
Portfolio insurance
Stress testing portfolio insurance
Currency decisions
_ Portfolio risk management
CAPM and applications to asset management
Performance measurement and
risk adjusted performance attributions
The Zero Beta model & Brennan΄s model
Merton΄s continuous time Version
Case study on optimal asset allocation under currency uncertainty Managing Risk in Asset Management -
The Treynor measure
The Sharpe measure
Jensen΄s Alpha
Relationships between various measures
The tracking error the information ratio
The Sortino ratio
Recent developments and best practice refinements:
The Morningstar rating system
The actuarial approach
VAR based analysis
Taking management style into account
_ Timing analysis
The Treynor and Mazuy method
The Henriksson methods
Decomposition of Jensen΄s measure and
Tiing evaluation
_ Measuring the performance of internationally diversified portfolios
The international asset pricing model
The McDonald model
Pogue, Solnik and Russelin΄s model
Limitations and criticisms
Module 2
_ Overview of financial derivatives
Forwards and futures
Interest rate, currency and equity swaps
Options
Credit derivatives
Use of derivatives in funds
Controlling the use of derivatives in funds Compliance issues
- Portfolio risk management using derivatives
Role of derivatives hedging
Static vs. dynamic replication
Use of futures contracts
Option related hedging
Portfolio insurance as a hedging strategy
Risk management of funds with derivatives
Case study
Risks of structured products
Case study: portfolio of fixed income securities and derivatives to be evaluated against a benchmark. Special issues:
Hedge efficiency
Basis risk evaluation
Setting a Limit framework
_ Risk management of hedge funds
Equity hedged strategies
Long/ short equities
Market Neutral
Market timing
Relative Value strategies
Convertible arbitrage
Static returns
Gammatrading
Pricing inefficiencies
Fixed income arbitrage
Volatility arbitrage
Capital structure arbitrage
Event driven strategies
Merger arbitrage
Distressed securities
Regulation D
Global macro strategies
Managed futures
Systematic strategies
Discretionary strategies
Risk perspective of hedge funds strategies
The due diligence process
Case study: analysis of a hedge fund and assessing its suitability for a pension fund
Module 3
_ Funds of hedge funds
Industry overview
Portfolio management strategies
Style risks and diversification the selection of strategy sectors
The due diligence process funds of hedge funds (applied example)
Defining and managing portfolio risk
Transparency (emerging regulatory trends)
Active risk management & liquidity concerns
_ Portfolio of hedge funds style drifts
Definition and importance
Detection, monitoring
and control
Performance attribution and risk exposure
Peer Group analysis
Applied examples
_ Operational risk management
Importance
Approach
Operational risk framework
Reporting and audit
Key risk indicators
Operational risk capital can funds learn from banks?