CERA, Module 0: A Refresher Course in Financial Mathematics and Risk Measurement
Over the last decade, the concept of Enterprise Risk Management (ERM) has gained significant momentum in the insurance industry and beyond. This came with the recognition of risk as being something not per se to be avoided, but to be optimally exploited in the frame of a company’s risk appetite. This is reflected in regulatory changes, such as Solvency II requiring an actuarial and a risk management function in all (re-)insurance undertakings. Actuaries should see this as an opportunity to broaden their role, and to show that they are ideally equipped to carry out these tasks.
Against this backdrop, in November 2009, several actuarial associations launched the CERA credential as a global risk management designation for actuaries which:
- Encompasses a world‐class curriculum that combines actuarial science with the theoretical, practical and professional principles of ERM
- Instils the highest professional standards, with an impeccable code of ethics and rigorous educational requirements
- Is recognised worldwide and transferable internationally
- Applies both qualitative and quantitative insight to ERM, and
- Equips risk management professionals to empower better business decisions and more profitable business developments
Based on the education und examination system of the German Actuarial Association, the EAA offers a series of training courses and exams (through DAV) to study for the CERA designation to all actuaries who want to deepen their knowledge in Enterprise Risk Management.
The Seminar A Refresher Course in Financial Mathematics and Risk Measurement
The seminar gives an introduction to modern financial mathematics, derivative pricing and risk measurement. It is designed to prepare actuaries without adequate training in these fields for the quantitative parts of the CERA education. The seminar is moreover an ideal learning opportunity for actuaries who want to get acquainted with or refresh their knowledge in these highly relevant fields.
The seminar begins with a repetition of basic concepts in probability theory including characteristics of random variables such as moments and quantiles. In this context we will also introduce important distribution-based risk measures such as VaR and Expected shortfall. In order to prepare the analysis of dynamic financial models we introduce the idea of conditional expectations, we discuss stochastic processes in discrete time.
The seminar continues with an introduction to financial mathematics. We study risk neutral valuation and the hedging of derivatives in discrete-time models, followed by a brief introduction to the modern theory of coherent risk measures.
The last part of the seminar is devoted an introduction to financial mathematics in continuous time. Topics covered include stochastic processes in continuous time such as Brownian motion and the Ito formula, the Black Scholes model and the pricing and hedging of simple stock and bond options. The seminar consists of lectures interspersed by short exercise sessions.