BAN2205. Understanding Risk and Hedging – Back to Basics

This session will define the types of risk and explain key concepts of hedging, as well as typical pros and cons. We will walk through core types of risk exposures facing financial institutions (by the asset class) and explore how to handle the review and analysis of level 3 assets/liabilities (highest designation of risk for fair value assets/liabilities).

Learning Objectives:

• Determine how/why these risk types reside on a balance sheet (trading book, entities in different countries etc). Example “what is IR risk and why do we have it”?
• Identify one example from each asset class/risk type, assess the risk and hear examples of how to effectively transfer/mitigate the risk through derivative hedging
• Evaluate a macro approach as well as creating a valuation uncertainty framework where the unobservable risk is documented, and reasonable alternative input is selected.