CPA Australia Financial Risk Management study guide
CPA Australia Financial Risk Management · Work through your exam, one topic at a time.
Financial Risk Management is a CPA Program subject within the CPA Program, which the source describes as being made up of four compulsory subjects and two electives. Candidates typically encounter it after the core compulsory subjects, when they choose electives that match their career direction - in this case, roles involving treasury, market and credit risk, liquidity and funding, operational and model risk, or hedging and derivatives. The CPA Australia Financial Risk Management study guide has 6 sections and about 2,752 words.
01Financial risk management fundamentals and governance
This domain tests how risk appetite, governance structures and risk frameworks turn risk measurement into board-level decisions. Expect questions on risk taxonomy, the risk appetite statement, the three lines model, ISO 31000 and COSO ERM, and the roles of the board, board risk committee and CRO.
484 words, about 2 min02Market risk measurement and management
This domain tests the measurement of losses from movements in prices, rates, volatilities and correlations, and the use of limits, hedging and stress testing to manage them. Expect calculations using VaR, duration, DV01 and beta, plus questions on backtesting and the limitations of models.
446 words, about 2 min03Credit risk measurement and management
This domain tests how lenders quantify default and recovery, price expected loss, hold capital for unexpected loss, and use mitigation and credit derivatives. Expect calculations of expected loss and questions on ratings, the Merton model, collateral, netting and Basel approaches.
456 words, about 2 min04Liquidity and funding risk management
This domain tests whether a firm can meet cash outflows as they fall due without unacceptable losses. Expect questions on maturity mismatch, the liquidity coverage ratio, the net stable funding ratio, stress testing, contingency funding plans and APRA APS 210 requirements.
456 words, about 2 min05Operational, model and enterprise risk management
This domain tests the management of losses from failed processes, people, systems and external events, the governance of models, and the aggregation of risk across the enterprise. Expect questions on Basel operational risk approaches, RCSA, KRIs, model validation, three lines roles and CPS 230.
478 words, about 2 min06Derivatives, hedging and risk transfer
This domain tests the use of forwards, futures, options, swaps and credit derivatives to transfer risk, and the risks that hedging itself creates. Expect payoff diagrams, hedge-ratio calculations, put-call parity, basis risk and counterparty risk questions.
432 words, about 2 min