Certified Market Risk Professional

CMRP

The CMRP equips the holder with sound knowledge of market risk management, especially  in the financial services industry.

The syllabus covers overview of market risk, identifying and measuring market risk for equity, fx market, fixed income and commodity markets, exotic instruments, options and credit risks in the market context, yield and interest rate curves, curve building and bootstraping, pricing models, VaR, stress testing, back testing, market risk technology, and best practice framework for market risk management.

Course Modules

OVERVIEW OF MARKET RISK

Definition of Market Risk

How Market Risk sits alongside other risks such as Credit, Liquidity, Operational and Conduct

Principal types of Market Risk – Interest Rate, Foreign Exchange, Equity and Commodity

Why and how all banks acquire Market Risk

Emerging Market Risks

Measuring Emerging Market Risk

Supervision in Emerging Market

BASIC ACCOUNTING AND FINANCIAL ISSUES

The structure of a bank’s balance sheet

The nature and purpose of capital

Basics of discounted cash flow

Mark to market v. accrual accounting

Derivative financial instruments

The concept of “option” contracts

The idea of “hedging”

Concept of a separate “trading book”

MARKET RISK IN A “TRADING” BOOK

The nature of “trading” activity

Accounting and regulatory requirements

Principal risk measures – positional, sensitivity and Value at Risk

An appropriate limit and control framework

Famous disasters – Barings, AIB, NAB etc

MARKET RISK IN A “BANKING” BOOK

 The nature of “banking” activity

Concept of “hold to maturity”

Accounting and regulatory requirements

Principal risk measures – gaps, income sensitivity and value sensitivity

Risk to “value” or to “margin”?

The role of the Treasury function

Principal hedging tools available

The importance of behavioural assumptions

Market risks stemming from impaired assets

MARKET RISK ACROSS THE ENTERPRISE

Hedging of Capital and Reserves

Macro hedging – uses and abuses

Structural foreign exchange risk

Credit spread risk and the blurred boundary between market and credit risk

GOVERNANCE OF MARKET RISK

The importance of Board risk appetite

An appropriate policy framework

An appropriate committee structure

Encouraging the right behaviours

The importance of good risk reporting

Stress and scenario testing

Model validation and data reconciliation

Segregation of duties – 3 lines of defence

Current regulatory developments – meeting the requirements of Basel 2

MARKET RISK MODELS

Parametric Models

Historical Simulation Models

Monte Carlo Simulation Models

Value at Risk Implementation

STRESS TESTING & BACK TESTING

Need for Stress Testing

The concept of stress testing as a complimentary tool to value at risk analysis

The creation of hypothetical and historical scenarios

The implementation of stress test scenarios into market risk modeling

The growing use of stress testing to risk managers

Incorporating into Market Risk Models

Implementation

Evaluating Stress Tests

Aggregate Stress Tests

Maximum Loss Approach

Extreme Value Theory

Systematic Testing

The technique of backtesting

The different types of backtesting

 

VALUE AT RISK

The concept of Value at Risk

The various methodologies of estimating VaR and their strengths and weaknesses

The comparison between the strength and limitation of VaR

The computation of VaR of foreign exchange spot, foreign exchange options positions, common shares/stocks, fixed income portfolio including portfolio

The various applications of VaR

The various methods to measure value at risk such as parametric, historical simulation and monte carlo simulation

The comparison among the various methods according to their characteristics, advantages and disadvantages

New forms of VaR

DelVaR

Advances in Monte Carlo Simulation

Variance reduction techniques in Monte Carlo Simulation

Advanced Volatility Models

Advanced Correlation Models

The process of value at risk implementation

APPLICATION OF ANALYTICAL TECHNIQUES

Framework of analytical techniques – gap, duration, simulation and value at risk

Concept and assumption under each techniques

Comparison and analysis of each techniques across various parameters

Application of techniques with real life case studies

CASE STUDIES

Orange County

Barings Bank

Metallgesellshaft

Who Can Sit for the Exam?

  • Traders and Treasurers
  • Market risk Managers
  • Risk Management Professionals
  • Accountants
  • Middle/Back office Staff
  • Institutional Investors
  • Auditors
  • Portfolio Managers
  • Risk Management Consultants
  • B.sc, M.sc and related degrees in related disciplines.