Financial Products & Associated Risk Management

Market Risk Management - Part 2


This eCourse consists of two modules on Value at risk (VAR). Module 1 focuses mainly on VaR, but also covers why the events of the global financial crisis led to regulators replacing VaR with expected shortfall (ES) as part of the revised capital requirements for market risk.

Module 2 describes the three different approaches that banks use for calculating VaR and the advantages/disadvantages of each. The tutorial also looks at the measurement of expected shortfall (or conditional VaR) and the associated regulatory requirements.


On completion of this course, you will be able to:
- Recognize how VaR can be used to measure and manage risk and the issues that arise in that regard
- Identify the key elements in VaR calculation models and the different approaches that can be used to estimate VaR
- Recognize the reasons why regulators decided to replace VaR for regulatory capital purposes with expected shortfall
- Calculate VaR using the three different models/methodologies – historical simulation, variance/covariance, and Monte Carlo simulation
- Identify the problems with VaR models/methodologies that were exposed by the financial crisis and the reasons why regulators replaced VaR with an expected shortfall (ES) measure for regulatory capital purposes

Content Highlight

Module 1: VAR & Expected Shortfall - An Introduction
Topic 1: Overview of Value at Risk (VaR)
Topic 2: Calculating VaR
Topic 3: Tail Risks & Expected Shortfall (ES)

Module 2: VAR & Expected Shortfall - Measurement
Topic 1: Historical Simulation
Topic 2: Variance-Covariance
Topic 3: Monte Carlo Simulation
Topic 4: Expected Shortfall (ES)

Administrative Details

Relevant Subject
Type 1 - Dealing in securities
Type 2 - Dealing in futures contracts
Type 3 - Leveraged foreign exchange trading
Type 4 - Advising on securities
Type 5 - Advising on futures contracts
SFC:2.00, PWMA:2.00
All Member: HKD640
Chinese Securities Association of Hong Kong (HKCSA): HKD670
Non-Member: HKD960
Staff of Corporate Member: HKD640