Abstract

This chapter begins with the presentation of the regulatory framework. It will help us to understand how the supervision on market risk is organized and how the capital charge is computed. Then we will study the different statistical approaches to measure the value-at-risk and the expected shortfall. Specifically, a section is dedicated to the risk management of derivatives and exotic products. We will see the main concepts, but we will present the more technical details later in Chapter 9 dedicated to model risk. Advanced topics like Monte Carlo methods and stress testing models will also be addressed in Part II. Finally, the last part of the chapter is dedicated to risk allocation.