About the IATACF
Module 2: Risk and Reward in Quantitative Analysis
Module two of the course will delve into the foundations of portfolio theory, specifically Markowitz’s classical approach, the Capital Asset Pricing Model (CAPM), and the latest advancements in these frameworks. The module will also explore quantitative aspects of risk and return, including the examination of econometric models like the ARCH framework. Additionally, it will cover industry-relevant risk management metrics, such as Value at Risk (VaR), and their practical applications.
Asset Portfolio Oversight
- Assessing risk and reward
- Advantages of portfolio diversification
- Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM)
- Exploring the concept of the efficient frontier
- Enhancing your portfolio through optimization
- Evaluating portfolio performance effectively
- Understanding Alphas and Betas
Essential Principles of Optimization and Their Practical Application in Portfolio Selection
- Basics of optimizing portfolios
- Constructing optimization challenges
- Resolution of unconstrained issues via calculus
- Application of Kuhn-Tucker conditions
- Establishing the Capital Asset Pricing Model (CAPM)
Value at Risk and Conditional Expected Loss
- Risk Assessment
- Value at Risk (VaR) and Stress Testing
- Expected Shortfall and Liquidity Forecasting
- The Ubiquity of Correlation
- Exploring the Boundaries: Extreme Value Theory
Empirical Patterns in Asset Returns: Vital Observations
- Understanding Volatility Clustering: Theory and Empirical Support
- Characteristics of Daily Asset Returns
- Features of High-Frequency Returns
Models of Market Volatility: The ARCH Approach
- Why ARCH models have gained popularity
- The inception of the original GARCH model
- The defining characteristics of ARCH models
- Exploring Asymmetric ARCH models
- The utilization of econometric methods
Regulation of Risk and Basel III/IV
- Capital Definition
- The Evolution of Basel
- Basel III/IV and Market Risk
- Key Provisions
Security and Margin Requirements
- Profiles depicting Expected Exposure (EE) across diverse instrument categories.
- Varieties of collateral utilized.
- Computation of both Initial and Variation Margins.
- The smallest permissible transfer amount (MTA).
- Documentation relating to ISDA and CSA agreements.
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