The most comprehensive educational resources for finance

The PRMIA Credit and Counterparty Risk Manager Certificate

Professionals in the field of Credit Risk Management are expected to have a thorough understanding of credit risk. This includes an in-depth understanding of credit risk analysis frameworks, deployment methodologies and the methods of credit risk management in corporate houses. In the light of the financial crisis of 2007-08, the importance of compliance to moral

Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management – Report

The President’s working group on financial markets composed of the department of treasury, board of governors of the federal reserve system, securities and exchange commission and commodity futures trading commission presented a report on Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management (LTCM). This report is available in paperback. The report that was

How to Calculate Annualized Standard Deviation

A stock trader will generally have access to daily, weekly, monthly, or quarterly price data for a stock or a stock portfolio. Using this data he can calculate corresponding returns from the stock (daily, weekly, monthly, quarterly returns). He can use this data to calculate the standard deviation of the stock returns. The standard deviation

Role of Risk Management

The role of risk management function is to enable the company to maximize return on capital and help it grow profitably. A risk control function is created whose objective is to preserve capital in trading and to also contribute to the decision making process. The various risks are identified and measured through an independent risk

Operational Data Governance

The concept of data governance has come about because traditional methods of ensuring data quality are not living up to the expectations.

How Companies Choose Their Risk Profile

Once a company’s firm-wide risks are identified and measured, the question becomes “What is the bet risk profile for the firm?” Active risk management can add value by helping a firm attain what it believes to be its appropriate risk profile, whether it takes the form of decreasing or increasing risk. Companies should take risks

ALM Overview – Dimensions of Risk Management for a Depository

This document provides an excellent overview of ALM and financial risk management in a Depository. The topics covered include: ALM background and framework Highlights in interest rate risk Regulatory perspective Case study: Appetite for interest rate risk Two measures of interest rate risk: NII and EVE Factors for setting risk limits ALM brings unification of

Case Study: Equity Derivative Losses at UBS

In 1997, United Bank of Switzerland lost heavily in the equity derivatives market, with estimated losses  pegged between $400 and $700 million. It is said to have lost $700 million in long positions in LTCM (Long Term Capital Management). The UBS case speaks strongly for strong internal risk control measures and adherence to the same.

Tails of the Unexpected (Andrew Haldane and Benjamin Nelson)

This reading is a part of the syllabus for FRM Part 2 Exam in the section ‘Current Issues in Financial Markets’. The normal distribution provides a beguilingly simple description of the world. Outcomes lie symmetrically around the mean, with a probability that steadily decays. It is well-known that repeated games of chance deliver random outcomes

Trust and Delegation (Operational Risk in Hedge Funds)

This reading is a part of the syllabus for FRM Part 2 Exam in the section ‘Risk Management and Investment Management’. This paper studies operational risk in the hedge fund industry using due diligence reports. Many funds suffer from operational problems, including limited disclosure of legal and regulatory issues. We use direct evidence of inadequate