The financial markets of today are highly integrated and hence susceptible to the risk of volatility spillovers from some corner of the global markets to other corners. The availability of innovative financial instruments and the herding behavior of the investor community contribute to the riskiness of financial markets. Financial risk management, as a discipline, gained importance chiefly because of a series of debacles involving financial derivatives in the 1990s. Understanding the nature of financial risks and the techniques for managing these risks has become imperative for professionals working in different segments of the financial markets. This 2-day programme aims to provide an overview of various aspects of financial risk management.

Learning Objectives

The objective of this programme is to acquaint the participants with the process of financial risk management, the types of risks faced by financial institutions and the techniques for measuring and managing these risks. The course is designed to enable the participants to:

• Understand the concepts of market risk, credit risk and operational risk
• Understand how financial derivatives can be used for mitigating market and credit risk
• Learn how to compute Value-at-Risk (VaR) and Expected Shortfall (ES) for portfolios involving different asset classes
• Understand the regulatory requirements regarding capital adequacy

Topics covered

• Overview and fundamental concepts of financial risk management –types of financial risk, measuring risk and return, measuring volatility, correlations and covariance, time series analysis, volatility forecasting
• Financial derivatives for managing market and credit risk – the use of forwards, futures, swaps and options for hedging market risk, options trading strategies, options Greeks, volatility smile, credit derivatives
• Measuring market risk – estimating the VaR using different techniques, back-testing VaR and stress testing
• Measuring credit risk – estimating default probabilities using structural models, statistical models and credit ratings migration
• Measuring operational risk – estimating VaR for operational risk
• Capital adequacy framework of the Basel Committee of Banking Supervision (BCBS)

Pedagogy

The programme delivery will involve a combination of lectures, numerical examples in MS-Excel, building models using MS-Excel and / or R, case discussions and learning through shared experiences of the participants.  

Who should attend

Working professionals looking for opportunities in the risk management and compliance domain, executives working in the back offices of bank treasury and seeking to move to roles in treasury middle office and professionals involved in audit of financial institutions who need a more structured understanding of financial risk management.

Programme Director

Dr Aparna Bhat is a Chartered Accountant and holds the Financial Risk Manager (FRM) certification from the Global Association of Risk Professionals (GARP), USA.  In addition, she holds a Post Graduate Diploma in Treasury and Forex Risk Management from ICFAI. Her doctoral research involved a comparative analysis of alternative option pricing models for the pricing and hedging of exchange-traded currency options in India.  She is currently working with the K. J. Somaiya Institute of Management (K J SIM) as Associate Professor in the area of Finance where she facilitates courses on Derivatives and Risk Management and Financial Institutions and Markets. Aparna has a total work experience of 26 years till date of which 14 were spent in the corporate sector in various areas such as audit, finance and accounts and risk management. Before joining K J SIM, she was handling the Risk Management function at the National Stock Exchange (NSE). Her research interests are in the areas of stock markets, financial derivatives and financial risk management models. She has published many papers on these topics in international, peer-reviewed journals. She is empanelled as a trainer with the National Institute of Securities Markets (NISM) and has conducted several Continuing Education Programmes on Equity and Currency derivatives and Capital Market Operations for the members of stock exchanges.