Risk Management in Banking

About the Author. Introduction. Section 1: The Financial Crisis. 1 The 2007 2008 Financial Crisis. Section 2: Business Lines, Risks, and Risk Management. 2 banking Business Lines. 2 Risks and Risk Management. 4 Risk Management. Section 3: Financial Products. 5 Banking and Financial Products. 6 Essentials on Derivative Products. 7 Interest Rate Risk and Interest Rate Derivatives. 8 Foreign Exchange Risk and Foreign Exchange Derivatives. 9 Credit Derivatives. Section 4: Valuation. 10 Distribution Functions. 11 Discrete and Continuous Returns. 12 Stochastic Processes. 13 Valuation and Pricing Risk. 14 Some Applications of Valuation Techniques. Section 5: Risk Modeling. 15 Sensitivity. 16 Volatility. 17 The Value at Risk Measure. 18 VaR and Capital. Section 6: Regulations. 19 Banking Regulations: Basel 1 and Market Risk. 20 Banking Regulations: The Basel 2 Accord. 21 Accounting Standards. Section 7: Asset Liability Management (ALM). 22 Liquidity Management and Liquidity Gaps. 23 Interest Rate Gaps. 24 ALM and Hedging Policies. 25 Implicit Options Risk. 26 Economic Value of the Balance Sheet. 27 Economic Value and Convexity Risk. Section 8: Funds Transfer Pricing Systems. 28 Funds Transfer Pricing Systems. 29 Economic Transfer Prices. Section 9: Dependencies and Portfolio Risk. 30 Correlations and Covariances. 31 Conditional Probabilities. 32 Factor Models. 33 Dependencies and Copula Functions. 34 Simulations with Factor Models or the Copula Approach. Section 10: Market Risk. 35 Delta normal VaR. 36 Historical and Hypothetical Simulations. 37 Simulation of Interest Rates. 38 Back Tests, Benchmarks and Stress Tests. Section 11: Credit Risk: Standalone. 39 Credit Risk Data. 40 Rating Systems. 41 Statistical and Scoring Models. 42 The Option Approach to Defaults and Migrations. 43 Default Probability and Default Intensity. 44 Credit Risk Potential Exposure. 45 Modeling Recoveries. 46 Credit Risk Valuation and Credit Spreads. Section 12: Credit Portfolio Risk. 47 Credit

Joël Bessis (Paris, France) graduated as an Engineer from Ecole Centrale in Paris, earned a Master in Business Administration at Columbia University in New York, and received a Ph. D. in Finance at the University of Paris Dauphine. Since 1980, he has been working as a Professor of Finance at Group HEC, the leading French business school. As an academic, Joel Bessis published various papers and books in the fields of corporate finance, industrial economics, and financial markets. He is a frequent speaker at professional conferences. Joel Bessis developed a dual expertise, as an academic and as a practitioner, holding permanent consulting assignments in corporations and, later, in banks. Joel Bessis worked over 15 years in this area for financial institutions. Joel Bessis has acquired experience in bank wide risk management in many well-known financial institutions. He has been a consultant to risk departments of several banking institutions in Europe. He held a permanent consultancy position for 7 years at Banque Paribas in the Risk Department and for two years at the European Bank for Development (EIB). On leave of absence from HEC Paris from 2000, he was Director of Research at FitchRatings in 2000-2001, Head of Validation at the Risk Department of Ixis, a Paris-based Investment Bank, and held the same position at "Groupe Caisse d'Epargne", one the major French banks, until 2006. He is now Professor at HEC Paris and maintains consultancy assignments in Banks. He conducts executive training in risk management in Eastern Europe, US and Asia.