CFA L1 / PM / M6. Risk Management
Module 6 · Portfolio Management

Introduction to Risk Management

EN: Risk management framework, risk tolerance, and key risk measures.
VN: Khung quản trị rủi ro, mức chấp nhận rủi ro và các thước đo.

1. Risk Management Process Concept

About: Identify → measure → assess vs tolerance → manage (accept/mitigate/transfer/avoid) → monitor + report. Cycle, not one-shot.Tóm tắt: Identify → measure → assess → manage → monitor. Vòng lặp, không chỉ 1 lần.

Steps

  • 1. Identify and define risks.
  • 2. Measure risks (quantify).
  • 3. Assess against risk tolerance / appetite.
  • 4. Manage — accept, mitigate, transfer, avoid.
  • 5. Monitor and report.

2. Categories of Financial Risk Concept

About: Market (equity/IR/FX/commodity), credit, liquidity, operational, solvency, model. Each managed differently.Tóm tắt: Market, credit, liquidity, operational, solvency, model. Mỗi loại quản lý khác nhau.
  • Market Equity, interest rate, FX, commodity.
  • Credit Default risk of counterparties.
  • Liquidity Inability to liquidate at fair price.
  • Operational People, processes, systems, external events.
  • Solvency Inability to meet long-term obligations.
  • Model Incorrect or misused model.

3. Risk Measures Core

About: σ, β, duration, delta, VaR, CVaR/expected shortfall, stress test. VaR most-cited but underweights tail risk — CVaR addresses that.Tóm tắt: σ, β, duration, delta, VaR, CVaR, stress test. VaR phổ biến nhưng nhẹ tail — CVaR sửa.
  • Std dev Total volatility — symmetric measure.
  • Beta Systematic risk relative to market.
  • Duration Interest-rate sensitivity (FI).
  • Delta Option price sensitivity to underlying.
  • VaR Value at Risk — max expected loss at confidence level over horizon.
  • CVaR Conditional VaR / Expected shortfall — average loss conditional on VaR being exceeded.
  • Stress test Performance in extreme scenarios (historical or hypothetical).

4. Risk Modification Concept

About: Avoid (don't take), Accept (take with reserves), Mitigate (diversify, hedge, limits), Transfer (insurance, derivatives, securitization).Tóm tắt: Avoid, Accept, Mitigate, Transfer.

Four levers

  • Avoid Don't take the exposure.
  • Accept Take it (perhaps with reserves).
  • Mitigate Diversify, hedge, set limits.
  • Transfer Insurance, derivatives, securitization.

Practice problem Practice

Practice problem

Daily portfolio losses worse than $1M occur on 5% of days. State this in VaR terms.

Show solution
VaR at 95% confidence over 1 day = $1M.
Equivalent: P(loss > $1M) = 5%.
1-day 95% VaR = $1,000,000