The applied methods for calculating risk are relatively new and represent a fast developing sphere of management. As a result, rules and internal controls are now in place for measuring and modeling risk-related loss.
This course examines different methods of risk management. You will learn how to calculate the probable consequences of risk in Excel which will help you make well informed decisions.
The course reviews the applied concepts related to probability. Step by step, the Value at Risk method, considered the gold standard of risk management, is laid out. VaR examples and calculations of the historical and parametric models, the popular Monte Carlo simulation and others are presented and examined.
The Altman Z score and Merton models for solvency valuation are explained through examples and supplemented by calculations of the expected and unexpected losses models of credit risk.
One section is dedicated to investment risk. We will show how the classic measures of risk-adjusted return, such as the Sharpe and Sortino ratios are used. Special attention is awarded to calculating the return on capital metric – RAROC, which is used not only by banks but by firms as well when evaluating the impact of operational, market, and credit risk on their finances.
All methods, models, and techniques are explained with minimum complex math while simple indicative case studies and examples are solved in Excel with the respective functions and calculations.