Interest rate risk, liquidity risk, or credit risk attract the attention of financial regulators nowadays. The Basel Committee highlighted weaknesses in the organizational aspects of stress testing programs and practices prior to the start of the crisis. Finding rigorous risk measures for the trading book is a key actual issue in the financial institutions. Therefore, it is of major importance to understand the risk management and measurement methods as well as the current regulatory framework.

This course aims at a comprehensive view of the financial regulations regarding the interest risk and liquidity risk management, credit risk, and operational risk issues as well as on the regulators' requirements on stress testing procedures. After understanding the regulatory framework, students have the opportunity to learn about risk measurement techniques proposed by the academic literature or widely used in the industry. Case studies introduce the implementation of stress testing techniques like stressed VaR, time-varying volatility in VaR, or extreme value theory applications.