Risk Management Technology in Financial Services. Risk by Dimitris N. Chorafas

By Dimitris N. Chorafas

Written for execs in monetary prone with accountability for IT and danger administration, Dimitris Chorafas surveys the technique required and IT structures and constructions to aid it based on Basel II. The ebook is in line with the chance administration certification means of GARP, in addition to the accounting principles of IFRS, in accordance with examine the writer performed with IASB. the writer provices an in-depth dialogue of the kinds of possibility, pressure research and using situations, mathematical versions, and IT structures and infrastructure specifications.

* Written in transparent, common type for monetary executives to supply priceless info for danger keep an eye on decisionmaking
* in keeping with GARP, IFRS and IASB probability administration techniques and procedures
* Explains pressure checking out and its position in possibility keep watch over

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Extra info for Risk Management Technology in Financial Services. Risk Control, Stress Testing, Models, and IT Systems and Structures

Sample text

2 Derivatives exposure Information about exposure assumed with derivative financial instruments is very important to the firm for risk management reasons, and to regulators because of systemic risk. Under US GAAP, companies must account for derivatives under the Financial Accounting Standards Statement 133 (SFAS 133). 3 The objective of SFAS 133 and IAS 39 is to provide a sound basis for risk control. Both require that all derivatives (subject to certain exemptions) must be accounted for at fair value.

M. Page:35 Trimsize:165×234 MM What is meant by risk management? 35 risk is usually incurred by not adhering to applicable laws, rules and regulations – local or international. Tax risk results from tax authorities opposing the institution’s position on tax issues. Security risk is the risk of loss of confidentiality, integrity or availability of information or assets, through accident or fraud. This type of risk divides into physical security and information security. The legal fees themselves may be crippling.

Page:52 Trimsize:165×234 MM Risk management technology in financial services derivatives resemble insurance. However, while credit derivatives can be a source of benefits to the underwriter, they present two critical challenges that can precipitate a flight to safety and perhaps a financial crisis. First, they create moral hazard when banks use them to shift lightly assumed risks. Second, they encourage banks to lend more than they otherwise would, to riskier borrowers at lower rates. The so-called ‘plain vanilla’ version of credit derivative instruments is a credit default swap (CDS), where the protection buyer pays the protection seller a fixed recurring amount in exchange for a payment contingent upon a future credit event – for instance, bankruptcy.

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