imported>Doug Williamson |
imported>Doug Williamson |
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| | The risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. |
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| The Certificate in Financial Maths & Modelling qualification and course.
| | In exchange-for-value settlement systems, the risk is generally defined to include both replacement cost risk and principal risk. |
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| The CertFMM was formerly provided and tutored by the Association of Corporate Treasurers.
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| CertFMM was an elective part of the AMCT qualification from 2006 to 2016.
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| == Overview of the course ==
| | A weighted measure reflecting both the maximum possible amount of the credit loss (also known as the credit exposure), and the likelihood of such loss. |
| CertFMM equips you with the practical insights and understanding to:
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| - Challenge and use the outputs from models to support important risk management and valuation decisions.
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| - Build and validate models in MS Excel, or on other platforms.
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| CertFMM provides a rigorous integrated set of tools to understand and explain:
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| * Financial instruments
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| * Financial risk
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| * Corporate value and
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| * The fundamentally important relationships between them.
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| The most important benefit of working with these tools is developing the skill to identify assumptions, and the confidence to challenge them.
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| This is essential in practice because so many real life assumptions are unstated, unrecognised, and expensively or dangerously wrong.
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| The emphasis is on the practical investigation of real life problems and opportunities to either:
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| * Save costs or
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| * Reduce risk or
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| * Identify pricing bargains.
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| Techniques include interest, foreign exchange and commodity risk modelling.
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| The general purpose tools and techniques are then applied to practical case studies.
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| The course introduces and analyses the use of options for financial risk management.
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| It incorporates the valuation of different types of option using binomial pricing models and the Black Scholes model.
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| It also introduces and applies Value at Risk (VaR) measures, their important uses and their even more important limitations.
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| == Course structure ==
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| The course is structured into six units covering:
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| #Financial modelling fundamentals
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| #Applied debt modelling
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| #Foreign exchange modelling applications
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| #Practical derivatives modelling
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| #Options
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| #Applied corporate finance and real option modelling
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| == Financial modelling fundamentals ==
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| These are the nuts and bolts of financial maths and modelling in the five essential areas of:
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| * Practical [[interest rate]] optimisation
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| * Modelling series of fixed, growing or declining future cashflows, including pension liabilities
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| * Modelling the term structure of interest rates using no arbitrage
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| * Expensive misconceptions in statistics
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| * Value at Risk and its limitations
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| The platform used on the course is MS Excel.
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| The principles illustrated and applied are also fully relevant to all other platforms.
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| == Applied debt modelling ==
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| This unit investigates debt in the important areas of:
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| *Present values
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| *Future cash flows, timing and risk
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| *Interest rate sensitivity and hedging
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| You will gain a deep and broad applied understanding of the relationships between value, risk, maturity, coupon rate and coupon frequency.
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| == Foreign exchange modelling applications ==
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| This unit introduces and applies the key tools to model [[foreign exchange]] (FX) including:
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| *FX quoting conventions
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| *[[Hedging]] using forward foreign exchange contracts
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| *Relationships between foreign exchange rates, interest rates and [[inflation]] rates
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| *Applying [[VaR]] to foreign exchange risk management
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| == Practical derivatives modelling ==
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| This covers the maths and modelling of derivatives in:
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| *Derivatives modelling fundamentals
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| *Modelling long-term swaps
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| == Options ==
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| This unit investigates options in depth in the four areas of:
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| *[[Option]] payoffs
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| *Modelling option hedges
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| *Option valuation modelling
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| *Options [[arbitrage]] and the put-call parity relationship
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| == Applied corporate finance and real option modelling ==
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| The final unit of the CertFMM course integrates the techniques introduced earlier, and covers:
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| *Modelling for corporate finance including corporate valuation
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| *Capital structuring in practice
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| *[[Real option]] modelling
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| | == See also == |
| | * [[Banker's payment]] |
| | * [[CCR]] |
| | * [[Counterparty risk]] |
| | * [[Covenant]] |
| | * [[Credit default swap]] |
| | * [[Credit derivative]] |
| | * [[Credit exposure]] |
| | * [[Credit risk diversification]] |
| | * [[Capital risk]] |
| | * [[ECL]] |
| | * [[Event risk]] |
| | * [[Exchange-for-value system]] |
| | * [[High-yield]] |
| | * [[KMV]] |
| | * [[Merton distance-to-default]] |
| | * [[Operational risk]] |
| | * [[Pre-settlement risk]] |
| | * [[Price risk]] |
| | * [[Prime bank]] |
| | * [[Principal risk]] |
| | * [[Putting a limit on losses]] |
| | * [[Replacement cost risk]] |
| | * [[Reputational risk]] |
| | * [[Risk mitigation]] |
| | * [[Sovereign risk]] |
| | * [[TED spread]] |
| | * [[Transaction risk]] |
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| === Other resources ===
| | [[Category:Manage_risks]] |
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| [[Media:The_Treasurer_articles - financial_applications.pdf| Financial modelling applications, The Treasurer]] | |
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| == See also ==
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| * [[Annuity factor]]
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| * [[Association of Corporate Treasurers]]
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| * [[Capital asset pricing model]]
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| * [[Cross-currency interest rate swap]]
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| * [[Day count conventions]]
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| * [[Discount rate]]
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| * [[Dividend valuation model]]
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| * [[Excel]]
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| * [[Financial maths]]
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| * [[Financial model]]
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| * [[Foreign exchange forward contract]]
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| * [[Four way equivalence model]]
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| * [[Interest rate parity]]
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| * [[Internal rate of return]]
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| * [[LIBOR]]
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| * [[MCT]]
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| * [[Model risk]]
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| * [[Present value]]
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| * [[Real option]]
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| * [[Rounding]]
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| * [[Spreadsheet risk]]
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| * [[Swap points]]
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| * [[Value at risk]]
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