Backtesting is one of the most important steps in building a successful quantitative trading strategy. It is in fact a key step that differentiates algorithmic trading from discretionary trading. Quants use their computational finance and programming skills to build complex trading strategies. However, before these strategies are executed in the live market, they are tested […]
Risk Management
YIELD MANAGEMENT INC. TOKYO, JAPAN REVIEW
March 2018: Rising Interest Rates The word inflation is regular topic now in the business news. Economic indicators show it’s gradually rising in the United States which will have ripple effects throughout global markets. Inflation refers to an economic climate where prices are increasing and the value of money is falling. Low but positive rates […]
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. […]