Types of risks

Credit risk

3 main principles of credit risk management

Credit standing decreases

Liquidity risk

Major Reasons Banks Need Liquidity

Factors Influencing Choice of Sources of Liquidity

Interest rate risk

Interest rate RISE expected

interest rate FALL expected

Matching of asset and liability sides

Factors of Imperfection in Matching

Market risk

Increased size and activity of trading portfolios

Value-at-Risk (VaR)

Purpose of VaR

Parameters for VaR

Assumption for VaR distribution

Backtesting

Questionable accuracy of VaR

Country risk

Sovereign risk

Unique country-risk assessment system

Credit risk of national governments

Transfer risk

Consequence of restricting issuer's access to foreign exchange.

Solvency risk

Operational risk

Basel Committee's definition of operational risk

Management of operational risk

Why separate risk takers from risk controllers?

Case Study for Operational Risk