Rmb-Interestraterisksmanagement-100514035327-Phpapp01
Section II – Market Risk Measurement & Management
II. 1. A. Market Risk II. 1. B. Foreign Exchange Risk II. 2. A. Bond Prices, Discount Factors, and Arbitrage II. 2. B. Bond Prices, Spot Rates and Forward Rates II. 2. C. Yield-To-Maturity (YTM) II. 2. D. Generalizations and Curve Fitting II. 2. E. One-Factor Measures of Price Sensitivity II. 2. F. Measures of Price Sensitivity Based on Parallel Yield Shifts II. 2. G. Key Rate and Bucket Exposures II. 2. H. The Science of Term Structure Models II. 2. I. Mortgage-Backed Securities II. 3. A. Mechanics of Futures Markets II. 3. B. Interest Rates II. 3. C. Determination of Forward &Futures Prices II. 3. D. Swaps II. 3. E. Mechanics of Options Markets II. 3. F. Properties of Stock Options II. 3. G. Trading Strategies Involving Options II. 3. H. Introduction to Binomial Trees II. 3. I. The Black–Scholes Model II. 2. J. The Greek Letters II. 3. K. Volatility Smiles II. 3. L. Exotic Options II. 4. A. Implementing Delta-Normal VAR 3 9 13 16 20 24 26 33 36 40 43 47 50 58 65 73 75 78 82 85 93 100 103 112
Section II.1 (1)
II. 4. B. Simulation Methods II. 5. A. Introduction to VAR II. 5. B. Putting VAR to Work III. 6. A. The Delta-Normal Method for a Fixed Income Portfolio II. 6. B. Stress Testing II. 6. C. Decomposing Risk II. 6. D. Aggregating and Decomposing the Risks of Large Portfolios II. 6. E. Extreme Value Theory and VAR II. 7. A. A Firm-Wide Approach to Risk Management II. 7. B. Identifying and Managing Cash Flow Exposures II. 7. C. The Demand and Supply for Derivative Products II. 8. Commodity Forwards & Futures
116 122 128 132 135 138 140 144 148 153 159 163
Section II.1 (2)
II. 1. A. Market Risk
1. Describe five reasons why market risk measurement is important 2. List the models being used to calculate market risk exposure
Definitions
• • • Daily earnings at risk: Market risk exposure over 24 hours Horizontal offsets: Additional capital charges assigned to instruments with different maturities
II. 1. A. Market Risk II. 1. B. Foreign Exchange Risk II. 2. A. Bond Prices, Discount Factors, and Arbitrage II. 2. B. Bond Prices, Spot Rates and Forward Rates II. 2. C. Yield-To-Maturity (YTM) II. 2. D. Generalizations and Curve Fitting II. 2. E. One-Factor Measures of Price Sensitivity II. 2. F. Measures of Price Sensitivity Based on Parallel Yield Shifts II. 2. G. Key Rate and Bucket Exposures II. 2. H. The Science of Term Structure Models II. 2. I. Mortgage-Backed Securities II. 3. A. Mechanics of Futures Markets II. 3. B. Interest Rates II. 3. C. Determination of Forward &Futures Prices II. 3. D. Swaps II. 3. E. Mechanics of Options Markets II. 3. F. Properties of Stock Options II. 3. G. Trading Strategies Involving Options II. 3. H. Introduction to Binomial Trees II. 3. I. The Black–Scholes Model II. 2. J. The Greek Letters II. 3. K. Volatility Smiles II. 3. L. Exotic Options II. 4. A. Implementing Delta-Normal VAR 3 9 13 16 20 24 26 33 36 40 43 47 50 58 65 73 75 78 82 85 93 100 103 112
Section II.1 (1)
II. 4. B. Simulation Methods II. 5. A. Introduction to VAR II. 5. B. Putting VAR to Work III. 6. A. The Delta-Normal Method for a Fixed Income Portfolio II. 6. B. Stress Testing II. 6. C. Decomposing Risk II. 6. D. Aggregating and Decomposing the Risks of Large Portfolios II. 6. E. Extreme Value Theory and VAR II. 7. A. A Firm-Wide Approach to Risk Management II. 7. B. Identifying and Managing Cash Flow Exposures II. 7. C. The Demand and Supply for Derivative Products II. 8. Commodity Forwards & Futures
116 122 128 132 135 138 140 144 148 153 159 163
Section II.1 (2)
II. 1. A. Market Risk
1. Describe five reasons why market risk measurement is important 2. List the models being used to calculate market risk exposure
Definitions
• • • Daily earnings at risk: Market risk exposure over 24 hours Horizontal offsets: Additional capital charges assigned to instruments with different maturities