Course 5: Quantitative Risk Management

Quantitative Risk Management covers portfolio risk/liquidity adjusted valuation, return distribution and risk statistics; and their decomposition into contributions from key risk factors.

In particular, this course covers the following topics:

Aggregation, which is the computation of a portfolio’s value, including enterprise portfolios, and its ex-ante return distribution in both regular and stress markets
Ex-ante evaluation, which is the computation of risk measures such as VaR, CVaR, and more general spectral measures and expected utility
Ex-ante attribution, which is the decomposition of the ex-ante return and risk measures into key risk factors

After the course you will obtain a Statement of Completion. Furthermore, you can choose to complete an optional code-based project that will count as one of the two Practical Projects towards the ARPM Certification.

Step 6 - Aggregation: value

• Overview

• Portfolio value

• Credit value adjustment

• Liquidity value adjustment

Step 6 - Aggregation: performance

• Static market/credit risk

• Dynamic market/credit risk

• Stress-testing

• Enterprise risk management

Step 7 - Ex-ante evaluation: utility

• Overview

• Stochastic dominance

• Satisfaction/risk measures

• Mean-variance trade-off

• Expected utility and certainty-equivalent

Step 7 - Ex-ante evaluation: quantile-based

• Quantile (value at risk)

• Expected shortfall and sub-quantile

• Spectral satisfaction measures/Distortion expectations

• Coherent satisfaction measures

• Enterprise risk management

Step 8a - Ex-ante performance attribution

• Overview

• Bottom-up exposures

• Top-down exposures: factors on demand

• Relationship between bottom-up and top-down exposures

• Joint distribution

• Application: hedging

Step 8b - Ex-ante risk attribution

• Overview

• General criteria

• Euler decomposition

• Diversification management