Thank you for taking Course 3, market risk management, frameworks, and strategies. I hope you've enjoyed the course. In Course 3, we went through talking about different financial instruments and the risk factors that measure the sensitivity of those financial instruments to changes in interest rates, or changes in prices of equities and so on. We then looked at statistical models and probabilistic models that help us better understand those relationships and model those relationships so that we can measure and model the risk in portfolios of financial instruments. Portfolios of bonds or portfolios of stocks. Lastly, we looked at measures that are used by risk managers of risk. These are measures of risk that's going to be in the future. It's not risk that we've seen in the past, although many of these measures are modeled using risk from the past, using data from the past, six months or two years. These are measures that are supposed to tell us what risk can we expect over the next day, over the next 10 days, over some time horizon in the future. Because what we saw in this course are that even though we can see the prices and what financial instruments or stocks bonds, we've seen what they've done in the past, we know exactly what they've done, we really don't know what they're going to do in the future. We can only try to predict that because from our perspective today, the price of a bond, or the price of a stock, or the price of a derivative is a random variable. This course was all about modeling random variables and coming up with measures of the risk of a probability distribution or a distribution of a random variable, or a density function, or a cumulative distribution function. Coming up with measures that would tell us about how much risk are we exposed to. The first one we looked at was Value at Risk. Now, Value at Risk tells you how much risk or how much of a loss you can expect to take with a certain level of confidence over a certain time horizon. It also tells you that you will not exceed that loss a certain percent of the time over a certain time horizon. Now, there's no guarantee with Value at Risk. You may have evaluate risks that says, your portfolio Value at Risk is say $100,000 loss. You may experience a loss much bigger than that because once again, we're dealing with random variables here. The Value at Risk doesn't measure the worst loss. It only measures the worst expected loss at a certain percentage of the time. It doesn't measure the loss the other percent of the time, the rest of the time. But it is very useful. Then we also talked about using expected shortfall, where you actually look at what that loss is the rest of the time, when it's a really big loss, and you take an average of that loss. That's what's used more and more by risk managers. We've looked at that too. Now, I hope this has given you a few tools and also the ability to look through the project where we're looking at a portfolio composed of stocks or stock indexes from different parts of the world to a internationally diversified stock portfolio where each of the indexes or each of the stocks is in a different currency. You have currency diversification, global diversification. We've looked at that. Now, coming up in the specialization, just looking at the specialization in perspective. First, we had our introduction to risk management. That was Course 1. Second, Course 2, we had credit risk management. That talked all about credit risk and really focused on credit risk in bonds and other types of loans or pretty much anywhere where you're lending money focused on credit risk. Now, we returned to credit risk in Course 3, this course. Now, when we talked about bonds, what really we didn't focus so much on credit risk, we focus more just on changes in the interest rates. Not so much changes in credit quality. Then now, coming up in Course 4, which will be the last course in this specialization, is operational risk management, frameworks and strategies. Now, operational risk is something completely different than what we've been talking about so far. Operational risk is very difficult to measure using the tools that we've learned so far, because operational risk is something that is embedded into different business processes, decision processes, reporting, could be in systems, could be in how data is stored, how data is protected. Really, operational risk is something that is throughout an organization, whereas market risk, credit risk, these are very definitely associated with financial assets, and they are actually relatively easy to model compared to operational risk. We'll see with operational risk that the tools we use to manage operational risk are in some cases quantitative. But oftentimes, managing operational risk is more of a qualitative process. It's a process of creating organizational informational structures that allow you to identify operational risk and then decide how you're going to manage them. If you're going to manage them at all or whether it's not cost-effective to manage them and so on. I hope you have enjoyed this course and I hope you'll enjoy Course 4 also. Thank you.
