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    Introduction To Financial Risk Management (With R)

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    This document provides an introduction to a course on financial risk management using R. The course objectives are to quantify portfolio risk and analyze real-world data with R. Key concepts covered include risk factors that influence asset and liability values, such as equity indices, interest rates, and commodity prices. The main objectives are to model the future distribution of risk factors and calculate value-at-risk and expected shortfall. Examples will examine the risk management practices of JPMorgan Chase using their SEC filings. Statistical and computational toolkits in R will be applied to analyze risk factor returns and characteristics.

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    Introduction To Financial Risk Management (With R)

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    16 views10 pages
    This document provides an introduction to a course on financial risk management using R. The course objectives are to quantify portfolio risk and analyze real-world data with R. Key concepts covered include risk factors that influence asset and liability values, such as equity indices, interest rates, and commodity prices. The main objectives are to model the future distribution of risk factors and calculate value-at-risk and expected shortfall. Examples will examine the risk management practices of JPMorgan Chase using their SEC filings. Statistical and computational toolkits in R will be applied to analyze risk factor returns and characteristics.

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    This document provides an introduction to a course on financial risk management using R. The course objectives are to quantify portfolio risk and analyze real-world data with R. Key concepts covered include risk factors that influence asset and liability values, such as equity indices, interest rates, and commodity prices. The main objectives are to model the future distribution of risk factors and calculate value-at-risk and expected shortfall. Examples will examine the risk management practices of JPMorgan Chase using their SEC filings. Statistical and computational toolkits in R will be applied to analyze risk factor returns and characteristics.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    16 views10 pages

    Introduction To Financial Risk Management (With R)

    Uploaded by

    Red
    This document provides an introduction to a course on financial risk management using R. The course objectives are to quantify portfolio risk and analyze real-world data with R. Key concepts covered include risk factors that influence asset and liability values, such as equity indices, interest rates, and commodity prices. The main objectives are to model the future distribution of risk factors and calculate value-at-risk and expected shortfall. Examples will examine the risk management practices of JPMorgan Chase using their SEC filings. Statistical and computational toolkits in R will be applied to analyze risk factor returns and characteristics.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    Introduction to Financial Risk Management (with R)

    Instructor – David A. Hsieh


    • Professor of finance, Duke University, Fuqua School of Business

    • PhD in Economics, MIT

    • Research: financial markets  risk management


    Course Objective
    • Quantify the risk of a portfolio.
    • Applies to banks, hedge funds, insurance companies, university
    endowments, pension funds
    • They have portfolios of assets and liabilities
    • They want the value of assets > the value of liabilities

    • Analyze real world data with R


    • Require basic knowledge of R, finance, statistics
    • Sample R code provided
    • Short exercises to reinforce learning
    Key concepts: Risk Factors
    • Values of assets and liabilities depend on many risk factors (=
    common sources of risk that are not diversfiable).

    • Examples of risk factors: equity indices, interest rates, FX rates,


    commodity prices, inflation

    • Idiosyncratic risk is diversifiable, therefore not considered


    Main Objective
    • Future distribution of risk factors

    • Value-at-risk (VaR)

    • Expected shortfall (ES)


    Example: JPM 2016 Form 10K
    List of risk management (p. 33)
    Enterprise-wide Risk Management
    Capital Risk Management
    Credit Risk Management
    Country Risk Management
    Liquidity Risk Management
    Market Risk Management
    Others: Principal Risk, Compliance Risk, Legal Risk, Model
    Risk, Operational Risk, Reputation Risk
    Market Risk and VaR
    • Daily Market Risk-Related Gains and Losses vs. Risk Management VaR (1-day, 95% Confidence level) during 2016
    Statistical tool kit
    • Which risk factors are important?
    • Equity? Interest rate? FX? Commodity?

    • What is the distribution of risk factor returns?


    • Normal? Heavy tails?

    • How predictable are risk factor returns?


    • Serial correlation?
    • Volatility clustering?
    Computational tool kit
    • We will apply the statistical tool kit to a very simplistic
    setting using real world data.

    • We will use the R program to perform these calculations.


    • Microsoft Open R
    • RStudio

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