Market and Liquidity Risk Management Certification Training Course

Why select this training course?

Understanding markets and liquidity is difficult in a complex financial system. However, it is one of the important aspects of finance one should understand and its implication in the increasingly multifaceted financial scenario. Financial institutions, corporations, central banks, and institutional investors around the globe are increasingly adding to their market risks in different business scenarios by trying to generate higher returns while keeping costs low.

How does liquidity affect market risk management?

Low liquidity increases market risk because it makes buying or selling assets more difficult and expensive. This can result in wider bid-ask spreads, decreased market efficiency, and increased market volatility. In extreme cases, low liquidity can lead to market freezes and fire sales, where assets are sold at fire-sale prices to meet obligations, exacerbating market losses. Financial institutions and risk managers need to consider both the level and quality of liquidity to manage market risk. This includes monitoring the liquidity of their portfolios, as well as the overall market conditions. In periods of low liquidity, risk managers may adjust their positions, reduce their exposure to certain assets, or implement contingency plans to ensure they can meet their obligations.

What are the key factors to consider when it comes to risk management?

The key factors to consider in risk management include the following:

• Identifying potential risks
• Assessing risk likelihood and impact
• Prioritising risks
• Developing risk mitigation strategies
• Monitoring and reviewing risk management processes
• Communicating risk information
• Incorporating risk management into decision making

The Market and Liquidity Risk Management Certification Course by Rcademy intends to discuss various models used in market and liquidity risk management and methods considered best practices by experts. It will be highly engaging to ensure participants actively participate in group discussions to identify valid case use of the skills learnt. It will also help them identify the wrong choices various companies and individuals make they experience issues, the risks they ignore, and how ignored issues can majorly affect the performance of the companies.

This Rcademy course will give a better overview of the issues that arise while managing liquidity risks as well as provide solutions to the issues. It will be highly focused on the practical aspects of risk management, various measure processes, existing frameworks for risk mitigation, and tools used to manage risk.

Who should attend?

The Market and Liquidity Risk Management Certification Course by Rcademy is ideal for:

• Auditors.
• Compliance officers.
• Asset managers.
• Financial planning
• Strategy development officers.
• Corporate risk managers.
• Financial service officers.
• Project managers.
• Liquidity managers.
• Risk analysts.
• Bankers
• Regulatory and supervisory officers.

What are the course objectives?

The objectives of The Market and Liquidity Risk Management Certification Course by Rcademy are to enable participants to:

• Understand how to maintain a good risk culture in any company or business they are in
• Learn the various types of procedures and limits necessary in market risk management
• Be able to interpret appropriateness in issues that involve products of risk and liquidity in the market
• Understand how to calculate and use risk metrics.
• Discover various types of liquidity risks, regulatory risks, counterparty risks, and accounting risks
• Gain real-world experience in measuring and managing risks
• Understand the main principles of market risk
• Describe elements of FTP and various approaches
• Be able to stress test successfully
• Appreciate the existing market risks and how they shape financial services
• Apply the learnt skills to analyse various interactions of different risks such as reputational, market, credit, and operational

How will this course be presented?

This course will be facilitated by highly trained experts in teaching and their fields of specialisation using the following methods.

• Presentation
• Short videos.
• Lecture notes.
• Exercise
• Examples and case studies.

What are the topics covered in this course?

Module 1: Fundamentals of Market Risk

• The differences between the banking book and trading book.
• Definition of the market risks and their application.
• Understanding market terminologies such as capital, risk, and hedging.
• Understanding trading book.
• Market limits and risks overview.
• Instruments movement between bank restrictions.
• Overview of volatility.
• Risk transfer internal treatment.
• Organisational structure and governance of risk management.

Module 2: Internal Models Introduction.

• Eligibility and model requirements of risk factors.
• General criteria and standards used in a qualitative study.
• Testing requirements.
• Expected shortfall.
• Risk capital default.
• Exception situations treatment.
• Stress testing and model validation.
• Bank-wide and desk-level trading.
• Non-modellable risk factors.
• Capital aggregation.

Module 3: Interest Rate Risks and Capital Requirements.

• Behavioural options treatment.
• Criteria for standardised methods.
• Shock scenario design in interest rates.
• Stress testing trading techniques
  – Securitisation treatments.
  – Portfolio stress testing level.=
  – Secured finance transactions.
  – Business-specific stress testing.
• Indeterminate maturities treatment.
• Risk appetite.
• High-level principles.
• Shock scenario and stress testing.
• Governance structure.

Module 4: Capital

• Structures and general provisions.
• Securitisation and non-securitisation treatment.
• Delta, curvature, and vega risk weights and their correlations.
• Trading portfolio and correlations definition.
• Risk factor, capital maths, and sensitivities.
• Residual risk add-on
• Instruments and their main concepts.
• Main concepts in sensitivities-based techniques.
• Capital calculation requirements.

Module 5: Standardised Methods

• Reporting processes and their main functions.
• Important standardised capital calculation.
• Options treatment.
• Current interest rate risk treatment.
• Commodities, forex, interest rates, and equity.
• Sale securities available.
• Economic earnings and value-based measures.
• Supervisory and banking principles.
• Interest rates concepts.
• Pilar I and II approach.

Module 6: Liquidity and Risk Management

• Introduction to liquidity risk issues and the importance of regulation to liquidity risks.
• Available stable funding and various factors categorisation.
• Liquidity coverage ratio as part of liquidity risk measurement.
• Discount factors.
• Net cash outflows.
• Net stable funding ratio.
• Inflow and outflow important calculations.
• Other liquidity measurement methods.
• High-quality liquid assets.

Module 7: Required Stable Funding

• Funds transfer and liquidity risk pricing.
• Funding plans contingency plans.
• Stress testing for liquidity risk and gap reports.
• Intraday risk measurement methods, techniques for limits, management, and stress testing.
• Risk tolerance, liquidity risk governance, and risk limit setting.
• Categorisation of stable funding.

Module 8: Risk-Weighted Assets, Leverage Ration, and Capital Ratio

• Introduction to the supplemental leverage ratio and leverage ratios.
• On and off-balance contingent sheet exposure considerations and methods.
• Required capital ratios Tier I.
• Credit risk for a loan portfolio.
• Leverage exposure categorisation.
• Risk-based weighted assets and capital ratio.
• Markt risks, including
  – Equity exposure
  – Stress VaR.
  – Traded value risk.
  – Incremental risk charge.
• Operational risk requirements.
• Basel III
  – Collateral treatment.
  – Contrast of Basel III to Basel I and II.
  – Asset value correlations.
  – Wrong-way risk.
  – DVA
  – CVA
  – Elementary counterparty.
• Central clearing counterparty implications on market requirements.
• Countercyclical buffer requirements.
• Minimum capital ratios required.
• Global systematically important financial buffers.