Unlock Risk Measurement & Risk Assessment for Effective Work

Learn to measure market risk (systemic risk) and its components: interest rate risk, equity risk, and currency risk. Apply techniques like value at risk and stress testing to manage losses.

The lecture frames credit risk around the probability of default and exposure at default to guide lending decisions, and introduces structural and reduced form models to estimate risk.

Identify and manage operational risk from internal processes, people, and systems, plus external events, including non-quantifiable factors, using qualitative methods like scenario analysis and risk control self-assessments.

Examine liquidity risk and its measurement challenges, using cash levels, liquidity ratios, and funding costs as indirect indicators amid market dynamics and contagion.

Understand how probability distributions quantify risk, from the normal distribution with mean and standard deviation to the log normal distribution for positive values, plus when to use alternatives.

Explore how the mean anchors risk analysis and sets expectations, then use variance and standard deviation to gauge volatility, spread, and portfolio risk.

Explore how correlation links asset movements, differentiate positive, negative, and zero relationships, and see how diversification and correlation breakdown affect portfolio risk.

Define value at risk (VaR) to quantify portfolio losses over a horizon at a confidence level, using historical simulation, variance-covariance, and Monte Carlo methods, noting tail risk and extreme events.

Explore conditional var, or expected shortfall, which reveals average tail losses beyond the var threshold and strengthens risk management in stress testing and Basel three framework contexts.

Explore stress testing and scenario analysis to assess portfolio resilience under extreme events, from market shocks to regulatory shifts, and strengthen risk management with robust data and assumptions.

Explore risk adjusted returns, focusing on roc and the Sharpe ratio to compare returns relative to risk and capital. Understand how volatility and the risk-free rate shape decisions.

Basel I set minimum capital adequacy based on credit risk. Basel II added pillars and risk-weighted assets, and Basel III strengthens buffers and liquidity metrics.

Evaluate underwriting risk with actuarial models to price premiums that cover claims and profit. Manage reserve and catastrophic risk using loss development factors, chain ladder models, catastrophe modeling, and reinsurance.

Learn how non-financial industrial companies measure and manage project and operational risk using Monte Carlo simulation, failure mode and effects analysis, and risk matrices to protect timelines and costs.

Basel III strengthens risk measurement by raising capital adequacy, tier one and tier two capital, risk-weighted assets, and enforcing LCR, NSFR, and the 3% leverage ratio.

ISO 31000 guides a structured, enterprise-wide risk management framework that integrates risk into governance and decision making through identification, assessment, treatment, and monitoring and review.

Define risk appetite as the amount of risk an organization is willing to pursue to meet goals, and show how risk tolerance and limits guide decisions.

Explore how systemic risk arises from interconnected financial systems and how macroprudential metrics such as leverage ratio, liquidity coverage ratio, and stress tests help regulators and central banks preserve stability.

Investigate how risk perception blends subjective feelings with data, shaped by availability bias, overconfidence, anchoring, and loss aversion, and apply awareness and objective models to improve risk assessment.

Learn to measure climate risk across physical, transition, and liability risks using tcfd guidance and tools like climate value at risk, climate scenario analysis, and assessment models to quantify impacts.

Apply cyber risk measurement frameworks to quantify exposure despite limited historical data, using the cyber security framework's identify, protect, detect, respond, and recover and the fair model with threat intelligence.