Market Risk Analysis SeminarFederal Reserve System Courses

Type of Participant Targeted

Market Risk Analysis Seminar (MRAS) is a course designed for individuals with one to three years of supervision and regulation experience. The curriculum is designed to provide the basic set of examination skills needed to understand and provide supervisory oversight of a financial institution’s trading book. The typical participant will have experience with (1) bank examinations, (2) the analysis of financial institutions, and (3) the examination of investment portfolios and treasury activities during the examination or inspection of financial institutions.

Prerequisites

Participants should be familiar with financial derivatives (futures, forwards, swaps, and options) and financial math. They should also have a basic understanding of trading activities. Participants will receive a pre-seminar reading assignment, “Review of Basic Math and Financial Concepts,” to determine their familiarity with the concepts covered. In addition, they will receive background papers on related topics as supplementary review materials.

Course Overview

MRAS provides an overview of trading market risk management, including the products used to manage market risk in the trading book, counterparty credit risk management, and the value-at-risk (VaR) measurement method. The course provides participants with a systematic strategy for analyzing market risk in the trading book. The course is a combination of lectures on technical risk management topics and short case studies that apply the concepts studied. Fully qualified participants will not require any pre-course study, although background papers on various subjects are provided if participants wish to review basic concepts.

Course Objectives

At the end of this one-week seminar, the participant will, at a minimum, be able to

• Describe the elements of sound internal controls and risk management systems for a bank's trading book
• Discuss investment and derivative products and understand the components of market risk that can be controlled through the use of on- and off-balance-sheet instruments
• Describe market organization, regulation, and emerging issues in the derivatives market
• Discuss the significance of credit risk management for trading activities
• Describe the VaR method as it relates to trading activities and portfolio management
• Discuss the tools commonly employed to identify, measure, monitor, and control market risk
• Discuss the incentives for securitization, the major types of securitized assets, and the risks and regulatory considerations when a bank begins securitization activities
• Describe the basic accounting concepts and methods for derivative instruments from an international accounting standards perspective

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