AIRAF case studies
AIRAF · Put your knowledge to work in context.
The AIRAF is an examination in applied risk analysis and finance, structured around a six-domain body of knowledge that runs from governance and framework design through identification, quantification, mitigation, monitoring and reporting, and finally regulatory and ethical standards. It is aimed at practitioners whose work touches risk in a financial or enterprise setting: risk analysts, compliance and control staff, internal audit professionals, treasury and operations specialists, and early-career quantitative staff who need a structured, defensible way to reason about exposure. The AIRAF case studies are 5 cases and about 2,356 words.
1When the Governance Committee Wants to Override the Risk Appetite
A mid-sized asset manager has a board-approved risk appetite statement capping firm-wide 1-day 99% VaR at 1.8% of NAV. In a strong quarter, the CIO's desk requests a temporary increase to 2.4% to capture a widening credit spread opportunity, arguing the limit was set in a low-volatility regime.
482 words, about 2 min2The Vendor Model That Nobody Can Validate
A regional bank relies on a third-party vendor's credit-scoring model to price small-business loans. The model was purchased 18 months ago and has never been independently validated; the vendor treats the algorithm as proprietary and provides only summary statistics.
489 words, about 2 min3VaR That Understates the Tail
A trading firm reports 1-day 99% VaR of $4.2 million using a historical simulation with 250 days of data. A new risk analyst notices that the model has produced only three exceptions in the last 12 months against an expected 2.5, which looks acceptable - until she realizes the 250-day window still contains the calm pre-crisis period and excludes the most volatile month because of a data gap.
476 words, about 2 min4The Control That Looks Good on Paper
A payments company has a control requiring dual approval for any transfer above 50,000. Testing last year found zero exceptions, and the control is rated effective.
448 words, about 2 min5The Dashboard That Hid the Losses
A wealth management firm's monthly risk report to the executive committee shows a single 'operational loss' line that has been flat at about 200,000 for eight months. The head of compliance notices that near-miss incidents and small losses below 10,000 are logged in a separate system and never aggregated into the report.
461 words, about 2 min