RISK is a four letter word and been fancied these days. Everyone knows about risk and every firm is accompanied has best process, best standards, best people till the time an incident or big impact is not been made.
The recent example of fine imposed by the US authorities on various Investment banks like BNP PARIBAS SA, BANK OF AMERICA, RBS, HSBC, STAN CHARTED, ING, J.P. MORGAN are some of the examples of the above. Corporate are heavily investing in the compliance and in the risk management department but they forget to invest on the employees.
Risk management has become a key function in almost every large company, but all too frequently it makes an organization so risk-averse that initiative and innovation become paralyzed. Continue reading “Risk Management should be an Integral part of Corporate Culture”
Zero Hedge is one of my favorite blog on the risk analysis and for the global events, the blog argues that we are living in the Golden Age of Central Bankers, and that wreaks havoc on the fundamental nature of market expectations data.
- The VIX (Volatility Index) is not a reliable measure of market complacency.
- The wisdom of crowds is non-existent.
- Fundamental risk/reward calculations for directional exposure to any security are problematic on anything other than a VERY long time horizon.
- I’d rather be reactive and right in my portfolio than proactive and wrong.
The Golden Age of the Central Banker is a time for survivors, not heroes. And that’s the real moral of this story.
Let’s dig deep to understand the most basic question in risk management. Continue reading “Risk Analysis – Central banks and Volatility”
I did this post last year but the essence is clearly visible now so posting it again under new rules and regulations.
Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses. Continue reading “The Concentration of Collateral, is it invitation to Systemic Risk”
I did this post last year but the essence is clearly visible now so posting it again under new rules and regulations :-
Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses.
However, the safety bid combined with Central Banks monetization of every sovereign risk asset onto their balance sheet has reduced the amount of quality collateral available; this scarcity of quality collateral creates liquidity problems. Continue reading “Collateral Concentration Risks : Are we inviting the Systemic risk ?”
The final approvals for the BASEL III capital standards provided by US regulators. Was going through one of the article published in American Banker written by Clifford Rossi, opens up that implementing robust capital standards that give individual institutions sufficient buffers from extreme events and protect the system at-large has been a major challenge for regulators and the Basel Committee since the inception of risk-based capital charges years ago. However, over reliance on analytic methods that failed miserably during the crisis puts the entire system at risk while creating enormous burdens on institutions and regulators to closely oversee these models. Continue reading “BASEL III – Risk Exposed”