Treasury Risk Management

Overview

Liquidity risk has always been at the heart of a bank's day-to-day Treasury operation, but now there is also regulation. The course examines how Treasury manages both liquidity and market risk, addressing regulatory changes including the shift from Value at Risk (VaR) to Expected Shortfall (ES).

Risk Management Overview

• The five essential steps: identify, quantify, mitigate, review, revise

Liquidity Risk

• Definition and real-world examples (Northern Rock case study)
• How banks' maturity transformation creates liquidity challenges
• Quantification metrics including loans-to-deposits ratios and gap analysis
• Regulatory frameworks: Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
• High-Quality Liquid Assets assessment and stress testing

Market Risk

• Interest rate risk measurement using basis point value (BPV)
• Fixed income analysis: yield, duration, DV01
• Evolution of risk metrics from VaR to Conditional VaR / Expected Shortfall
• Interest rate swaps and counterparty credit risk mitigation
• Foreign exchange risk management
• Option Greeks (vega, gamma)
• Fundamental Review of the Trading Book (FRTB) approaches