CQF Risk Brochure

GLOBAL STANDARD IN FINANCIAL ENGINEERING

CERTIFICATE IN

FINANCE

CQF

cqf.com

Quantitative Training for Risk Management

1Never Again? Risk management in banking beyond the credit crisis - KPMG Survey 2009

The CQF is the largest, fastest growing and most practical course in quantitative finance. Since its establishment in 2003, well over 1,600 employees in banks, hedge funds, insurance firms and energy companies have benefitted from the CQF’s captivating and applicable curriculum.

The global standard in quantitative finance, the CQF provides analysis of practical quantitative techniques important in today’s, and tomorrow’s, financial landscape.

CQF for Risk ManagementA recent McKinsey global survey conducted in May 2011 assessing banks’ confidence after the crisis, reported that investors now consider robust risk management to be more important since the global economic crisis than other issues, such as growth potential or return on equity, for example.

This increased focus has brought the role of the risk manager into sharp relief. Significant changes in regulations and the dire consequences associated with a failure to manage risk exposure tightly has led to augmented investment in training and development of risk professionals.

In order to excel as a risk manager a deep understanding of the pricing models and risk measures used by revenue-generating sections of the business is important. You need to be able to challenge the assumptions and underlying flaws that the models are based on, in order to be able to effectively assess the risks involved. The Certificate in Quantitative Finance will instil you with the mathematical rigor to understand these models and the confidence to question and challenge them.

76% of senior risk managers in a KPMG survey1 felt stigmatized as a support function and 29% cited lack of skills and experience as an element most at fault in contributing to the credit crisis. The CQF is a practical qualification which will give you the confidence to challenge models and assumptions.

Risk Management 20%

IT 16%

Trading 11%

Quantitative Analysis 10%

Consulting 7%

Derivatives 7%

Hedge Funds 7%

Structuring 6%

Fund Management 5%

Others 5%

Academia 3%

Actuary 3%

Class profile by occupationCQF delegates come from a rich diversity of backgrounds, responsibilities and nationalities bringing a wealth of experience to the program.

Delegates from a risk management background account for 20% of our yearly intake on the program.

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What is the CQF?

• Six-month flexible part-time program delivered twice a year• Designed for in-depth coverage of practical quantitative tools• Practical implementation of techniques and the questioning and analysis of models and methods• Highly acclaimed faculty, combining leading academics and practitioners specializing in the field of

quantitative finance• All lectures are available streamed over the internet live and recorded. Recorded lectures are available

in perpetuity• Extensive and rapidly expanding continuing professional development program for alumni

The program is perfectly suited for risk management and covers all the key topics that a strong risk manager or risk analyst needs. It is unique in its approach to focussing on the type of knowledge required by practitioners.

Our syllabus is dynamic, refreshed and reviewed every six months and constantly updated with topical content. This year alone we’ve added four new lectures to ensure that the CQF remains relevant for all quant finance professionals.

We study the theory but equally spend time on understanding the pitfalls when employing these theories in real life.

Practicality

• Learn to test and analyze the strengths and weaknesses of different financial models

Flexibility• All classes are recorded for full accessible learning• Online delivery and the CQF Companion Tablet allow

for study wherever it suits you• Defer to a future program at any time, should work

commitments require

Quality

• Taught by the best quant practitioners, lecturers and researchers in the world

• Continue to learn with free additional lectures, workshops and masterclasses

Value• The CQF is significantly more cost effective than any

other program at this level• 25% larger than any financial engineering program and

continually growing• Recognized by the industry as the global standard in

financial engineering

WHY PUT YOUR EMPLOYEES THROUGH THE PROGRAM?

“ Professionally, I can say that the CQF was probably the best thing I did to give my career the boost it needed. It enabled me to articulate myself with confidence in the area of derivatives pricing and calculation of risk for exotic instruments across multiple asset classes.”

Bipin PatelVP Global Markets, Prime Services, Risk Analytics

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Name: Robert BrooksDate: January 2011

Previous Qualifications: Business and Finance Law Degree, Brunel University. MSc Computing for Industry, Imperial College London. CIMA

Current Position: FS Risk Technology Consultant, Converge Group

“ My own investment appraisal of why I thought it was worth paying for this and not other programmes was the Lifelong Learning. I like the idea of being able to continue studies beyond the six months

The main reason for me doing the CQF was the personal development projects at the moment in risk management for automated trading and news analytics.

There are no other programs that give you the flexibility that the CQF does.”

CQF ALUMNI PROFILE

CQF Program Content

Basic Building Blocks of Finance Theory and Practice

We introduce the rules of applied Itô calculus as a modeling framework. Simple stochastic differential equations and their associated Fokker-Planck and Kolmogorov equations.

• Important mathematical tools and results• Taylor series• Ordinary differential equations• Probabilistic concepts• Gaussian, Poisson, Cauchy, Binomial, etc.• Central Limit Theorem• The random behaviour of asset prices• Stochastic calculus and Itô’s Lemma• Transition density functions• Partial differential equations• Applications of multiple integration• Fokker-Planck and Kolmogorov

Interest Rates and Products

This module reviews the plethora of interest rate models used within the industry. We discuss the implementation and limitations of these models and the need for a more sophisticated framework in order to understand these processes. Many of the ideas seen in the equity-derivatives world are encountered again here but in a more complex form.

• Fixed-income products• Yield, duration and convexity• Stochastic spot-rate models• Affine stochastic models• Change of numéraire • Heath, Jarrow and Morton• Calibration• Data analysis• Libor Market Model• Cointegration: Modelling long term relationships

MODULE ONE

MODULE FOUR

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Modules One to Five are examined at the end of each respective module. All delegates have to complete a project for Module 6. This is a practical programming project which is set during the second half of the course, designed to ensure delegates apply their theoretical knowledge to real-life problems that they can then take back to the workplace.

Risk and Return

We deal with the classical portfolio theory of Markowitz, the Capital Asset Pricing Model and more recent developments of these theories. We investigate risk and reward, looking at risk management metrics such as VaR. We also see the rudiments of option pricing principles and theory in the binomial model.

• Modern Portfolio Theory• Capital Asset Pricing Model• Value at Risk• Modelling and measuring volatility• Financial markets and products• The binomial model for asset prices• Numerical Methods• Further Itô integration• Martingale theory• Change of numéraire• The Radon-Nikodym derivative• Portfolio Optimization• Fundamentals of Optimization and Application to Portfolio Selection

Credit Products and Risk

Credit risk plays an important role in current financial markets. We see the major products and examine the most important models. The modeling approaches include the structural and the reduced form, as well as copulas.

• Reduced-form model and the hazard rate• Structural default models• Credit risk and credit derivatives• CDS pricing, market approach• Synthetic CDO pricing • Risk of default, structural and reduced form• Copulas• Implementation of copula models• Statistic Methods in Estimating Default Probability

Equity, Currency and Commodity Derivatives

The Black-Scholes theory, built on the principles of delta-hedging and no arbitrage, has been very successful and fruitful as a theoretical model and in practice. The theory and results are explained using different kinds of mathematics to make the delegate familiar with techniques in current use.

• The Black-Scholes model• Hedging and the Greeks• Option strategies• Early exercise and American options• Elementary Monte Carlo simulations • Elementary finite-difference methods• Martingale theory for pricing• Girsanov’s Theorem• Parallels between probabilistic and deterministic methodologies

Advanced Topics

The benefits of new models will be discussed from theoretical, practical and commercial viewpoints. The models derived in earlier parts of the course are only as good as the solution. Increasingly often the problems must be solved numerically. We explain the main numerical methods, and their practical implementation.

• Exotic options• Static hedging• Deterministic volatility and calibration• Stochastic volatility and jump diffusion• Non-probabilistic volatility models• Correlation, problems and solutions• Hidden risks in CDOs, and solutions• Monte Carlo methods, Brownian bridge, advanced schemes• Quasi-Monte Carlo methods, Sobol’, and more• Finite-difference methods, multi factor, implicit, Crank-Nicolson

MODULE TWO

MODULE FIVE

MODULE THREE

MODULE SIX

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Having completed the program, our alumni have lifelong access to our continuing professional development program, including lectures, classes, workshops and programming modules. Lectures are delivered by some of the field’s most eminent practitioners, including Bill Ziemba, Paul Wilmott, Nassim Taleb and Seb Lleo.

Lifelong Learning

LECTURE LECTURER

Understanding the financial markets in the subprime era Bill Ziemba

Classic quant mistakes Paul Wilmott

Long short portfolio optimization under mean-variance – CvaR framework Gautram Mitra

Validation of derivatives pricing models Dario Cziraky

Trading derivatives: real markets, real models, real smiles Nasir Afsaf

Scenarios and risk control for hedge funds Bill Ziemba

The scandal of prediction (audio only) Nassim Nicholas Taleb

That’s no way to run an economy Aaron Brown

Infinite variance Seb Lleo

CrashMetrics Paul Wilmott

Delegates from the following organizations have successfully completed the CQF

Accenture

ABN AMRO

Alexia Asset Management

Abu Dhabi Investment Authority

Bank of America Merrill Lynch

Bank for International Settlements

Baramex

Barclays Capital

BNP Paribas

British Energy

Calyon

Chicago Trading Company

Citadel

Citco

Citi

Commerzbank

Credit Suisse

Deloitte

Derivative Trading Systems Ltd

Deutsche Bank

Duff & Phelps

EDF Trading

Ernst and Young

Exane

Fidelity International

Fitch Ratings

GE Capital Solutions

Goldman Sachs

Gordian Knott

HSBC IB

HBOS

IBM

Intesa Sanpaolo

ING

Investment Bank of Greece

JP Morgan

KPMG

Lloyds

Man Financial

Marshall Wace

Mellon Capital Management

Mitsubishi UFJ Securities International

Moody’s

Morgan Stanley

Nationwide Financial

Nationwide Building Society

Nomura

Och-Ziff Capital

PAAMCO

RBS

RWE

Schroders

Thomson Reuters

Trafigura

UBS

Unicredit

Wachovia

Watson Wyatt

Wells Fargo

West LB

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Name: Stewart Button Date: January 2011

Previous Qualifications:Bachelor of Engineering with First Class Honours, University of Tasmania, Australia.

Current Position:Risk Management IS&D, Rabobank International

Current Position: “Having studied engineering prior to working in finance, I have always been fascinated by how things work. If you understand how something works then you can use it with confidence and improve upon it. The CQF has helped me ‘look inside’ the world of financial markets; derivatives and risk management systems to gain an insight which would not be possible through practice alone. The course has given me the tools to price financial instruments and systematically manage market and credit risk confidence.

Before enrolling on the CQF program I examined a variety of comparable qualifications. The promise of high caliber lecturers along with a substantial practical component left me in little doubt. I particularly appreciated the candid comments from many of the industry-based lecturers regarding the dangers of using particular models without a full appreciation of their underlying assumptions.

Throughout the course I have had the great fortune to get to know many of my classmates who work across a variety of financial and technical professions. This, combined with the CQF’s Lifelong Learning program, will ensure that I am able to embrace this exciting industry throughout my career.

The CQF is a challenging course. However, it is in every way worth the time and effort. It will not only sharpen your mathematical and analytical skills but completely revolutionise the way you view the field of finance.”

CQF ALUMNI PROFILE

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Program Delivery

New CQF Interactive Tablet

The CQF ‘Companion’ tablet is new for 2012. The portable lightweight tablet device has offline access to our portal and is preloaded with the Mathematics for Quantitative Finance Primer lectures and core lecture materials.

The tablet allows you to access your CQF Program whenever is convenient for you whether it is at home, on the train or in your lunch break. The tablet technology makes the CQF Program even more interactive and includes 1-2-1 instructor support for delegates all over the world.

The tablet

• Live 1-2-1 interactive lecturer support• Mathematics Primer lectures and notes• VBA lectures• Question forum • High definition multimedia at your fingertips

Live

55% of our delegates work through most of the course using the live lectures.

Recorded Classes

45% of delegates take most of the course watching the recorded material online.

All classes are recorded and then placed online. Every delegate is provided with their own online account allowing them access to the following:

• Recorded class lectures• Annotated class notes• Data• Sample code and spreadsheets• Additional/non-examined classes

The CQF tablet and online meeting system has been a revolutionary tool in supporting delegates and maximizing contact with faculty. This virtual environment allows delegates to discuss ideas, ask questions and interactively work on mathematics using the whiteboard facility. It can be used as a one-to-one tool or to create a group tutorial environment.

Delegates often comment on how it is as good as being in the same room as the lecturer, but with the added advantage that it can be used on the go!

Randeep Gug, CQF Lecturer

CQF interactive tablet

Contact the faculty through the interactive tablet

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Dr Paul Wilmott Dr Paul Wilmott is internationally renowned as a leading expert on quantitative finance. His research work is extensive, with more than 100 articles in leading mathematical and finance journals, as well as several internationally acclaimed books on mathematical modeling and derivatives, including the best-selling Paul Wilmott On Quantitative Finance, published by John Wiley & Sons. Paul has extensive consulting experience in quantitative finance with leading US and European financial institutions. He has founded a volatility arbitrage hedge fund and a university degree course.

Dr Riaz AhmadDr Riaz Ahmad is full-time director at 7city for all mathematical and computational finance based courses. In addition he oversees 7city’s Quantitative Finance series and consults on mathematical finance issues to City Institutions. Riaz received advanced degrees in mathematics from University College London and Imperial College London. He has held academic positions and lectured in mathematical finance at University College London (UCL), Lahore University of Management Sciences (LUMS) and Oxford University (Mathematical Institute).

Dr Espen Gaarder HaugDr Espen Gaarder Haug has worked in derivatives trading and research for more than 15 years. He worked as a proprietary option trader at J.P. Morgan in New York, and as an option trader for two multi billion dollar hedge funds, Amaranth and Paloma Partners. Before that, he worked for Tempus Financial Engineering, and as an option market maker in Chase Manhattan Bank (now J.P. Morgan Chase) and Dennorske Bank. He has been involved in almost every option market, including equity, currency, fixed income, energy and commodities. Espen Haug has a PhD degree from the Norwegian University of Science and Technology.

Neil GrahamNeil joined Barclays International in 1985 initially in the foreign exchange, money markets and derivatives operations areas before moving to the trading room in 1991. Here, his roles included both inter-bank and sales positions in spot and forward FX, money markets and treasury derivatives. After leaving Barclays in 1995, Neil became a local on the London International Financial Futures and Options Exchange (LIFFE) trading own account positions in interest rate, bond and equity derivatives. During his time on LIFFE, Neil also provided training to hedge-fund staff in FX and derivatives before moving to full time training in 1997.

Si Yi ZhouBefore joining 7city CQF faculty Si Yi worked as a risk analyst in a consulting firm to provide constructive solutions to banks and insurance companies. He has worked on many projects with leading financial institutions and academics to solve practical issues in the financial markets. In particular he is experienced in credit derivative pricing, portfolio credit risk and correlation analysis.

Dr Randeep GugDr Randeep Gug is Head of CQF Business. He is also a full time lecturer on the CQF faculty and a CQF alumnus. Prior to joining 7city, Randeep worked in a variety of roles. These include the Equities division at Salomon Smith Barney and trading futures on the Indian National Stock Exchange (NSE). He is a qualified teacher and holds a 1st class honours degree and a PhD for research into semiconductor Physics.

Peter JäckelPeter Jäckel is the founder and managing director of OTC Analytics. He received his DPhil in Physics from Oxford University in 1995. After a period in academic research, he migrated into quantitative analysis and financial modeling in 1997, when he joined Nikko Securities. When Nikko closed its European operations in 1998, he moved to NatWest, which later became RBS. In 2000, he moved to Commerzbank Securities’ product development group and co-headed up the team from 2003. From 2004 until 2008, he was with ABN AMRO as global head of credit, hybrid, inflation and commodity derivative analytics.

Dr Alonso PeñaDr Alonso Peña works as a quantitative analyst in the Structured Products group for Thomson Reuters plc. He holds a Ph.D. degree from the University of Cambridge (finite element analysis) and the Certificate in Quantitative Finance (CQF) from 7city. His area of expertise is the pricing of financial derivatives, in particular structured products. He has publications in the fields of quantitative finance, applied mathematics, neuroscience and the history of science. He is currently Honorary Visiting Senior Research Fellow at the University of Cambridge (2006-2009) and in the Teaching Staff of the Mathematical Institute at the University of Oxford. Alonso has recently been appointed Adjunct Professor at the SDA Bocconi Business School in Milan.

Moorad ChoudhryMoorad Choudhry is Head of Business Treasury, Global Banking and Markets at Royal Bank of Scotland plc. He previously worked as a gilt-edged market maker and sterling bond trader with ABN Amro Hoard Govett Sterling Bonds Limited and Hambros Bank Limited, and in structured finance services with JPMorgan Chase Bank. He began his City career at the London Stock Exchange in 1989.Moorad is a Visiting Professor at the Department of Economics, London Metropolitan University; a Visiting Research Fellow at the ICMA Centre, University of Reading; a Senior Fellow at the Centre for Mathematical Trading and Finance, Cass Business School; and a Fellow of the Securities and Investment Institute.

Dominic ConnorDominic has been programming in C and C++ since the 1980s when he graduated from Queen Mary College London. He has built trading systems for bond & equity markets, secure networks for the British government, reviewed C++ compilers for PC Magazine, and debugged operating systems for IBM & Microsoft. At some point he has written code for every major environment including Windows, OS/2, Reuters, Bloomberg, VMS, AS/400, DOS,VM and Unix.

Dr Sébastien LleoDr Sébastien Lleo is a researcher at Imperial College London. His research interests include investment management, risk management, asset pricing, stochastic control and stochastic analysis. Sébastien worked for seven years in the investment industry, at the Bank of Canada and at CMHC Pension Fund. Sébastien holds a PhD in mathematics from Imperial College London (UK), a MBA from University of Ottawa (Canada), and a MSc. in Management from Reims Business School (France). He is a CFA Charterholder, a Professional Risk Manager, a Certified Financial Risk Manager and a CQF alumnus.

The CQF faculty is a highly acclaimed team of instructors combining leading academics and practitioners specialized in the field of quantitative finance.

CQF Faculty

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CASE STUDY: Nationwide Financial and the CQF

1. What does Nationwide’s risk management department do?

Nationwide’s Quantitative Risk Management is an area within Nationwide Financial (a U.S. financial services company) devoted to hedging variable annuity financial guarantees. The department was formed in 2002 and is responsible for the entire variable annuity hedging practice.

Variable annuities are a form of retirement investment account. To protect these retirement savings, life insurers offer financial performance guarantees of varying complexity.

These financial guarantees are a large source of systematic risk for insurers and must be hedged. The complexity of these financial guarantees and their entanglement with actuarial risks like mortality, contract surrender rates, etc. makes this hedging very challenging. 2. Why does Nationwide put its entire risk management departmental staff through the CQF?

These financial guarantees and hedging practices (beyond simple strategies like cash flow matching, duration matching, etc.) are relatively new to the insurance industry. There is no established pool of “quants” to staff and develop these hedging programs, no standard software for managing these hybrid actuarial/financial risks, no generally accepted practices, etc. The CQF program allows Nationwide to take capable individuals from other fields – actuaries, energy traders, mathematicians, economists, etc. – and quickly train them in the fundamentals of hedging and financial risk transfer. 3. What do you think the CQF offers that other programs and courses don’t?

The CQF program is technically rigorous and quickly develops the expertise and intuition for derivative instruments. At the same time, the program starts at a level that is reasonable for most technical professionals. Stochastic calculus, Martingale processes and other mathematical beasts often make for an intimidating initiation to this field. The CQF program focuses on the essential functionality for the financial practitioner and is quite flexible about working with students from varying backgrounds.

Nationwide especially appreciates the practical emphasis of the CQF that complements the academic training. Reality often deviates markedly from theory. CQF lecturers are the “rock stars” of financial derivatives and help to bring practical tools and instill a healthy respect for what can go wrong in practice. Classroom and distance learning in conjunction with on-the-job exercises and coaching quickly brings students to a point where they can tackle real-world problems.

4. What changes has Nationwide seen in its risk management staff once they have completed the CQF?

Junior candidates without the CQF are typically in a support role, working side-by-side with more experienced practitioners. Once a candidate has entered the CQF, however, they quickly begin to understand the “why” of their work. No longer are they simply running a set of calculations, simply developing a faster bit of code, simply running a set of reports, simply reconciling a set of trades.

Candidates begin to see the variable annuity guarantee portfolio as a large exotic derivative portfolio with an understandable set of behaviors. Markets move up or down, yield curves change, and the portfolio responds in understandable ways. When it doesn’t they recognize the unusual and can ask, “Why?” This begins a process of inquiry and learning that creates senior candidates.

Eventually, candidates begin to bring this same understanding to a broader universe of instruments and can begin thinking about hedge strategies. What instruments make natural hedges? When do those hedges break down? What risks are left? Can I do the same thing more cheaply?

Ultimately, this disciplined approach to financial risk is valuable throughout the organization and candidates find themselves recruited into more senior roles.

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How to Apply

We aim to make applying for the CQF as easy as possible. Should you have any questions about the application process, send us an e-mail or give us a call.

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Apply online at cqf.com/apply, or e-mail [email protected] and we will e-mail or post an application form to you.

The CQF Admissions Department will come back to you within five business days indicating whether you have been granted preliminary acceptance onto the course, and the time-scale within which you must make your decision on the offer. We might also invite you to be interviewed over the phone by a Course Director.

You will then be required to fill out a short enrollmentform, accepting your place on the CQF. As part of completing this enrollment form, you will be required to pay a non-refundable deposit which will entitle you to reserve a place on the program and get access to preliminary course materials and lectures, including the CQF Tablet and Mathematics Primer.

You will also be required to complete a mathematics test before the course begins. This test will indicate to us what areas of mathematics are your strongest and weakest. You may complete this test up to one week after taking the Mathematics Primer.

Once you pay the balance of the course you will be able to take your place once the course commences.

We run information sessions around the globe – come along to meet the faculty and to find out more. Visit our website to book your space, view recordings of recent alumni and find out more detail about the program.

Contact: Europe, Middle East and Asia: Geoff Brown t +44 (0)20 7496 8600 e [email protected]: Jeff Bonaventura t 646-943-6207 e [email protected]

Find out more

Accreditations

The Professional Risk Managers International Association (PRMIA) grants CQF holders exemptions to the PRM qualification for a number of different modules.

The CFA Institute has a commitment to Continuing Education (CE), and encourages CFA Institute members to maintain and improve their professional competence. 7city Learning is registered with the CFA Institute as a program-level Approved Provider. Coursework for the CQF is eligible for 40 CE credits (equivalent to two years recommended minimum) and will be automatically recorded in CFA Institute members’ CE Diaries.

For Pre-Application Steps visit: cqf.com/admissions/pre-application-steps

GLOBAL STANDARD IN FINANCIAL ENGINEERING

7city Learning

4 Chiswell Street, London, EC1Y 4UP UK t +44 (0) 845 072 7620 f +44 (0) 20 7496 8607 w 7city.com55 Broad Street, 3rd Floor, New York, NY 10004 USA t 800 974 0394 f 212 480 2974 w 7city.com112 Robinson Road, #03-03 Singapore (068902) t +65 6327 1581 f +65 6248 9027 w 7city.com.sg

Dubai International Financial Centre, The Gate Village, Level 3, Building 10, PO Box 482058, Dubai t +971 (0)4-401 9818 w 7city.ae

CERTIFICATE IN

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