FRM2016_Slides_final - Financial Risk Management Lecture Notes(final Spring 2016 Thomas Ridder DZ BANK AG Frankfurt am Main [email protected]

FRM2016_Slides_final - Financial Risk Management Lecture...

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Excellence in Management Education Financial Risk Management Lecture Notes (final), Spring 2016 Thomas Ridder DZ BANK AG Frankfurt am Main [email protected]
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This Document ... . . . uses material from several sources. If not stated explicitly on the slide, references can be found at the end of the document. . . . displays links to other slides of this document as go to ... . . . displays hyperlinks to internet sites by blue and underlined text like WHU . Your pdf-reader may have to be configured to allow for direct internet access. . . . expresses the views of the author and not necessarily the views, the practice, or a recommendation of DZ BANK AG. . . . has been typeset by L A T E X using document class “Beamer”. Thomas Ridder Financial Risk Management, Spring 2016 - 2 / 256
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Course Agenda 1 Introduction 3 2 Credit Risk 81 3 Market Risk 162 4 Financial Market Regulation 207 Thomas Ridder Financial Risk Management, Spring 2016 - Introduction 3 / 256
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Course Agenda 1 Introduction 3 2 Credit Risk 81 3 Market Risk 162 4 Financial Market Regulation 207 Thomas Ridder Financial Risk Management, Spring 2016 - Introduction 4 / 256
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Course Agenda 1 Introduction 3 1.1 Economic Basics 6 1.2 Survey of Integrated Risk Management 16 1.3 Statistics Basics 44 1.4 Survey of Statistical Risk Indicators 56 Thomas Ridder Financial Risk Management, Spring 2016 - Introduction 5 / 256
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Course Agenda 1 Introduction 3 1.1 Economic Basics 6 1.2 Survey of Integrated Risk Management 16 1.3 Statistics Basics 44 1.4 Survey of Statistical Risk Indicators 56 Thomas Ridder Financial Risk Management, Spring 2016 - Introduction: Economic Basics 6 / 256
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Criticism of Modern Financial Risk Management From: Riccardo Rebonato (2007), Plight of The Fortune Tellers. Princeton University Press, p. ix and 137 “ Financial risk management . . . is forgetting that managing risk is about making decisions under uncertainty. It also seems to hold on two dangerous beliefs: I first, that our risk metrics can be estimated to five decimal places; I second, that once we have done so the results will self-evidently guide our risk management choices. They do not.” . . . a dangerous disconnect is forming between specialists (statisticians, mathematicians, econometricians, etc.) on the one hand, who are undoubtedly discovering more and more powerful statistical techniques, and policy makers, senior managers, and politicians on the other, who are ill-equipped to understand when, and how, and to what extend these sophisticated techniques should be used and relied upon.” Thomas Ridder Financial Risk Management, Spring 2016 - Introduction: Economic Basics 7 / 256
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Financial Statements Financial statements deliver information about the financial health and development of a company: I Balance sheet I Income statement I Cash flow statement I Capital changes statement Thomas Ridder Financial Risk Management, Spring 2016 - Introduction: Economic Basics 8 / 256
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Stylized Balance Sheet Diversity of Assets Debt Instruments Equity Assets Liabilities Thomas Ridder Financial Risk Management, Spring 2016 - Introduction: Economic Basics 9 / 256
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Equity, Debt, and Profits A 0 D 0 E 0 Profit A 1 E 1 D 1 t 0 t 1 I A profit
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