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L3 27 Risk Management > d evaluate a company’s or a portfolio’s exposures to financial and nonfinancial risk factors; > Flashcards

d evaluate a company’s or a portfolio’s exposures to financial and nonfinancial risk factors; Flashcards

L3 27 Risk Management (13 decks)

a discuss features of the risk management process, risk governance, risk reduction, and an enterprise risk management system;

b evaluate strengths and weaknesses of a company’s risk management process;

c describe steps in an effective enterprise risk management system;

d evaluate a company’s or a portfolio’s exposures to financial and nonfinancial risk factors;

e calculate and interpret value at risk (VAR) and explain its role in measuring overall and individual position market risk;

f compare the analytical (variance–covariance), historical, and Monte Carlo methods for estimating VAR and discuss the advantages and disadvantages of each;

g discuss advantages and limitations of VAR and its extensions, including cash flow at risk, earnings at risk, and tail value at risk;

h compare alternative types of stress testing and discuss advantages and disadvantages of each;

i evaluate the credit risk of an investment position, including forward contract, swap, and option positions;

j demonstrate the use of risk budgeting, position limits, and other methods for managing market risk;

k demonstrate the use of exposure limits, marking to market, collateral, netting arrangements, credit standards, and credit derivatives to manage credit risk;

l discuss the Sharpe ratio, risk- adjusted return on capital, return over maximum drawdown, and the Sortino ratio as measures of risk- adjusted performance;

m demonstrate the use of VAR and stress testing in setting capital requirements.

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