Risk Management in Finance

  1. Market Risk
    1. Sources of Market Risk
      1. Interest Rate Risk
        1. Yield Curve Risk
          1. Basis Risk
            1. Repricing Risk
              1. Option Risk
              2. Equity Price Risk
                1. Stock Price Volatility
                  1. Index Risk
                    1. Sector Risk
                    2. Foreign Exchange (Currency) Risk
                      1. Transaction Risk
                        1. Translation Risk
                          1. Economic Exposure
                            1. Currency Volatility
                            2. Commodity Price Risk
                              1. Energy Commodities
                                1. Agricultural Commodities
                                  1. Metals and Minerals
                                    1. Weather Risk
                                    2. Volatility Risk
                                      1. Implied vs. Realized Volatility
                                        1. Volatility Clustering
                                      2. Measuring Market Risk
                                        1. Sensitivity Analysis
                                          1. Duration (for bonds)
                                            1. Modified Duration
                                              1. Effective Duration
                                                1. Convexity (for bonds)
                                                  1. The Greeks (for options)
                                                    1. Delta
                                                      1. Gamma
                                                        1. Vega
                                                          1. Theta
                                                            1. Rho
                                                            2. Beta (for equities)
                                                            3. Value at Risk (VaR)
                                                              1. Definition and Interpretation
                                                                1. Parametric (Variance-Covariance) Method
                                                                  1. Historical Simulation Method
                                                                    1. Monte Carlo Simulation Method
                                                                      1. Limitations of VaR
                                                                        1. Confidence Levels and Time Horizons
                                                                        2. Expected Shortfall (ES) / Conditional VaR (CVaR)
                                                                          1. Definition and Calculation
                                                                            1. Comparison with VaR
                                                                              1. Coherent Risk Measures
                                                                              2. Stress Testing and Scenario Analysis
                                                                                1. Designing Stress Scenarios
                                                                                  1. Historical Scenarios
                                                                                    1. Hypothetical Scenarios
                                                                                      1. Reverse Stress Testing
                                                                                        1. Interpreting Results
                                                                                        2. Backtesting
                                                                                          1. VaR Backtesting
                                                                                            1. Model Validation
                                                                                              1. Exception Analysis
                                                                                            2. Managing Market Risk
                                                                                              1. Hedging with Derivatives
                                                                                                1. Forwards and Futures
                                                                                                  1. Mechanics of Forwards
                                                                                                    1. Mechanics of Futures
                                                                                                      1. Uses and Limitations
                                                                                                        1. Basis Risk in Hedging
                                                                                                        2. Options
                                                                                                          1. Call Options
                                                                                                            1. Put Options
                                                                                                              1. Option Strategies
                                                                                                                1. Protective Puts
                                                                                                                  1. Covered Calls
                                                                                                                    1. Collars
                                                                                                                      1. Straddles and Strangles
                                                                                                                    2. Swaps
                                                                                                                      1. Interest Rate Swaps
                                                                                                                        1. Currency Swaps
                                                                                                                          1. Commodity Swaps
                                                                                                                            1. Credit Default Swaps
                                                                                                                          2. Diversification
                                                                                                                            1. Portfolio Diversification
                                                                                                                              1. Asset Allocation
                                                                                                                                1. Correlation and Covariance
                                                                                                                                  1. Geographic Diversification
                                                                                                                                    1. Sector Diversification
                                                                                                                                    2. Dynamic Hedging
                                                                                                                                      1. Delta Hedging
                                                                                                                                        1. Gamma Hedging
                                                                                                                                          1. Rebalancing Strategies
                                                                                                                                          2. Natural Hedging
                                                                                                                                            1. Operational Hedging
                                                                                                                                              1. Financial Hedging

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                                                                                                                                          2. Types of Financial Risks

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                                                                                                                                          4. Credit Risk