Federal Reserve Board of Governors

Course Description for Trading

Risk Management

Last Revised: January 16, 2019
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Course Overview

TRM is a 4.5 day course offered by Intuition that will equip examiners with the specialized skills 

necessary to assess the quality of trading book risk management. Intuition, an external vendor, 

provides an overview of various traded products, their risk measurement (sensitivity measures), 

and how the liquidity characteristics and settlement processes differ across products. 

Participants will be introduced to trade cycles, trade execution issues, front office controls and 

market risk limits, middle office controls and valuation, and the back-office activities of 

verification and settlement.

Overview of Curriculum

Day 1: Trading Risk Basics

• Trading Business Overview

• Market Movements and Risk

• Market Risk Measurement

• Cash and OTC Derivatives: P&L, Product Life Cycles and Events 

Day 2: Risk Resolution

• Roles, Responsibilities and Limits: Front, Middle and Back Office

• Risk Management Systems: Technology, Reporting and Risk Management

• Challenges of Volatility and Illiquidity

• Risk dynamics in FX and Equity

Day 3: Interest Rate Risk Management

• Yield Curves and Interest Rate Risk

• Rates Business: Market Risk Identification & Analysis

• OTC Interest Rate Derivatives: Market Risk Identification and Analysis

Day 4: Trading Credit and Credit Risk Management

• Risk Dynamics of Credit Derivatives

• Potential Future Exposure (PFE) and Credit Valuation Adjustment (CVA)

• Changing Regulatory Environment

• Trading and the Dodd Frank Act

• Basel 2.5 and 3

Day 5: Modern Risk Management Challenges

• Model Development and Validation

• Approval Process for New Products

• Documentation Risk
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Course Objectives

By the end of TRM, participants will be able to:

• Evaluate the risk management of individual traded products such as futures, swaps, 

options, interest rate derivatives, credit derivatives/structured credit products, and equity 

derivatives.

• Explain at an intermediate level the risks inherent in the trading activities of large, globallyactive financial institutions.

• List the strengths and weaknesses of market risk and counterparty credit risk measurement 

models, how they complement each other, and the complexity and importance of 

developing strong assumptions.

• Assess the risks and control systems of complex trading related products in U.S. banks and 

foreign branch and agencies operating in the U.S.

• Explain the roles of front office, middle office and back office and appropriate segregation of 

duties.

• Evaluate the TRM processes at large, globally active financial institutions, with an emphasis 

on market and counterparty credit risk management, as well as front, middle and back 

office control activities.

• Evaluate the impact of trading risk management functions on the overall risk management 

rating.

• Identify applicable laws, regulations and supervisory guidance.

• Apply System and District-specific procedures to the examination of the various 

components of a trading operation.

Type of Participant Targeted

TRM is designed for an attendee who has (1) completed the System’s core curriculum or 

possess comparable equivalent working knowledge, (2) the requisite skills necessary to 

significantly contribute to trading review activities at regional institutions or money-center 

banking organizations and (3) a strong interest in developing a depth of knowledge in the 

capital markets.

Prerequisites

Course participants should possess examiner credentials or have a comparable level of 

experience based on their Reserve Bank’s assessment. Participants are expected to assess 

their depth of knowledge in a number of critical areas prior to the classroom experience by 

taking a series of online quizzes. Participants will be granted access to online training modules 

for each of the critical areas, as required, 8 weeks prior to attending the in-person component. 

Intuition estimates 15 hours to complete the critical the online material.

Class Size and Instructors

The course may be run with as few as 15 participants with a maximum of 25. Instructors for this 

course are provided by Intuition, the developer of the course. System capital market subject 

matter experts will attend to assist with the application of the course material to the examination 

process.
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