Tunis Business School - Fall 2020

Risk Management
The gateway to Financial Risk Manager (FRM) Certification

Eymen Errais, PhD, FRM

 Course Objectives

• This course introduces students to the tools, concepts, and issues of risk management. The
objective of the course is for students to acquire an understanding of the central issues in the
analysis of the different kinds of risks and how to manage them.

• This course allows students to enhance their ability to use different kinds of technical tools such
as Monte Carlo simulation, statistics & probability as well optimization tools

• Understanding these issues is an important decision making component at the firm level and a
key element for market analysis.

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 Course Objectives

Upon successful completion of the course, students will be able to:

▪ Understand the risk environment of the firm.

▪ Master the analyses of firms’ risk management using both quantitative and qualitative tools

▪ Analyse how firms and financial institutions can manage their risks.

▪ Be prepared to take the Financial Risk Manager (FRM) certification

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 References

➢ Financial Risk Manager (2nd Edition) by Philippe Jorion,

GARP, 2011.

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 Grading Distribution

➢ Quizzes and problems sets : 30 %

➢ Projects : 30 %

➢ Final Exam : 40%

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 Instructor

Eymen Errais has more than 15 years of experience in capital markets and
corporate finance, acquired from international institutions such as Merrill Lynch,
Credit Suisse, Barclays Capital, Deloitte and the World Bank. He was also Chief
Executive Officer of Mena Capital Partners, an investment house in the stock
market and CDC Gestion, a private equity fund management company. More
recently, he was advisor to the Minister of Development, Investment,
International Cooperation and Finance ad interim in charge of investment,
international cooperation and capital markets. He was also the advisor of the
minister of Higher Education and Scientific Research in charge of international
cooperation. He his now associate professor of Finance at Tunis Business School

Dr. Errais has a PhD in Management Science and Engineering from Stanford
University. He also holds two masters, the first in Operational Research and the
second in Financial Engineering. He is also the holder of several professional
degrees such as Financial Risk Manager (FRM), Corporate Finance Technical
Foundations and Investment Management of the Chartered Institute of
Securities and Investment (CISI).
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 Teaching Assistant

Ons Nbily

Ons nbily is currently a senior student at Tunis Business School. She is pursuing
a major in Finance and a minor in Information Technology. She aims to get a
key position in order to expand the knowledge she’s gaining during her
education at TBS and through virtual education platforms such as Coursera
and kpmg virtual internship as well as the programs ,workshops and
competitions she has been part of such as MAAN university alliance , ACTS ,
PBR competition and OST pre-incubator program .

Email : onsnbily8@gmail.com

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 Teaching Assistant

Oussema Ajal

A TBS Senior student with majoring in finance and minoring in IT. Winner
of the PBR challenge, Oussema was awarded an internship in the only
credit rating agency in Tunisia “PBR Rating” where he was able to
design a web application that automates the reporting process of
credit rating. He is also working with Maghreb Corporate, the only local
financial certification agency, as a quality assurance assistant. Seeking
to get into a prestigious PhD program in the US, Oussema is working on
financial research under the mentorship of Dr Errais.

Email :oussema.ajal@tbs.u-tunis.tn

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 Plan

• Appreciate the need for the management and review of risk

• Provide a framework & process for the management of risk
Objectives • Understand a variety of techniques to identify, assess, manage & monitor risks
• understand the overall management of risk process

1. Introduction to Risk Management 2. Market Risk 3. Credit Risk

• VaR as a risk measure
• Risk Basics • Introduction to Credit Risk
o VaR definition
o Understanding the Risk,Return o Overview of credit risk
o VaR parameters
couple o Settlement Risk
o Elements of VaR systems
o Risk Governance

o Risk Regulation • Measuring default Risk

• Identification of Risk factors
o Risk actors
Program

o Credit Event
o Market risks
o Default rates
o Discontinuity and Event Risk
• Quantitative Analysis o Recovery rates
o Fundamentals of probability
• Sources of Risk
o Fundamentals of statistics • Managing Credit Risk
o Currency Risk
o Monte Carlo Methods o Distribution of credit losses
o Equity Risk
o Expected credit losses
o Commodity Risk
o Credit VaR
o Portfolio Credit Risk Models
• VaR methods

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 Plan

• Appreciate the need for the management and review of risk

• Provide a framework & process for the management of risk
Objectives • Understand a variety of techniques to identify, assess, manage & monitor risks
• understand the overall management of risk process

4. Operational Risk 5. Interest Rate Risk 6. Risk Capital and Structure

• Introduction to Operational Risk • Introduction interest rate risk • RAROC

o Case histories o Fixed income securities and o Risk capital
o Business Lines interest rate risks o Raroc methodology
o Factors affecting yields
• Assessing Operational Risk • Performance evaluation
Constructing yield curves
Program

o Comparison of approaches • o Credit Event

o Actuarial Models o Bootstrapping o Default rates
o Nelson Siegel Model o Recovery rates
• Managing Operational Risk
o Capital allocation and insurance • Managing interest rate risk • Firmwide Risk Management
o Mitigating Operational Risk o Duration o Three pillar framework
o Convexity o Organizational structure

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