Specialist track, course code RM
Financial Risk Management
Financial risk management in practice: measuring, testing and governing market risk with VaR, expected shortfall, stress tests and the controls around the models themselves.
Financial risk management answers two questions: how much can we lose, and how sure are we of that number. The first is a matter of models such as Value at Risk and expected shortfall. The second is a matter of testing those models against history, against stress scenarios, and against the possibility that the model itself is wrong.
What does the risk management track cover?
Value at Risk covers historical, parametric and Monte Carlo methods and backtesting of VaR exceptions. Stress Testing covers historical and hypothetical scenarios and reverse stress tests. Model Risk Management covers model validation, inventories and governance. Expected Shortfall and CVaR, at Researcher level, covers coherent risk measures and their estimation. FRM Exam Preparation covers the Part I syllabus for candidates sitting the GARP examination.
Where does this track lead?
To the Certificate in Quantitative Risk Management, which adds GARCH volatility modelling and ends in a capstone risk report on a trading book.
Practitioner courses in this track
Lab-based courses. You build, test and cost real strategies and systems on market data.
- FRM Exam Preparation: Part I Structured preparation for the FRM Part I exam: the four Part I topic areas taught with worked problems, timed practice sets, and a mock exam. Independent preparation; not affiliated with or endorsed by GARP.
- Model Risk Management How financial institutions control the risk of using models: what counts as a model, inventories and tiering, independent validation, conceptual soundness, benchmarking and outcomes analysis, ongoing monitoring, and the governance expected by supervisors.
- Stress Testing How to design and run stress tests on a portfolio: historical and hypothetical scenarios, shocking risk factors consistently, reverse stress testing, liquidity effects, and presenting results that lead to decisions.
- Value at Risk How value at risk is calculated, tested and misused: historical simulation, variance-covariance and Monte Carlo methods, volatility-weighted variants, time scaling, regulatory backtesting, and what VaR does not tell you.
Researcher courses in this track
Proof-level courses. Stochastic models, estimation theory and the literature behind each method.
Credentials that use this track
- Certificate in Quantitative Portfolio ManagementSix courses and a capstone on building portfolios with numbers: mean-variance and its failures, robust optimisation, Black-Litterman views, factors, attribution and risk.
- Certificate in Quantitative Risk ManagementA financial risk management certification in five courses and a capstone on measuring and governing market risk: VaR and expected shortfall, volatility models, stress tests and the validation of the models themselves.
- Professional Diploma in Algorithmic TradingThe top credential on the practitioner path. Eight courses and a 40-hour capstone covering everything between a trading idea and a book you could defend to a risk committee.
Questions applicants ask
Is the FRM preparation course affiliated with GARP?
No. FRM is a designation of the Global Association of Risk Professionals. The Institute’s course prepares candidates for the Part I examination and is not endorsed by GARP.
Which risk measure do regulators use now?
For bank trading books, the Basel Fundamental Review of the Trading Book replaced 99% Value at Risk with 97.5% expected shortfall for internal-model capital. Value at Risk remains in wide use for limits and reporting.