The Question Every Risk Manager Should Ask

The Question Every Risk Manager Should Ask

The risk manager slumped behind his desk. It had been a long day, troubleshooting the latest emergency. He was tired. We both were. He was coming to terms—everyone was—with the fact that there would be no bonuses this year. Bonuses were tied to the firm achieving its...
How to Calculate Value-at-Risk – Step by Step

How to Calculate Value-at-Risk – Step by Step

The power of value-at-risk lies in ints generality. Unlike market risk metrics such as the Greeks, duration or beta, which are applicable to only certain asset categories or certain sources of market risk, value-at-risk is general. It is based on the probability...
Animal Spirits

Animal Spirits

Last week, some hedge fund manager made fleeting headlines when he announced he was bullish because “Animal spirits matter.” Are you paying attention? I hope not. As a risk manager, don’t be co-opted by finance’s latest loaded phrase:...
What’s Your Risk Appetite?

What’s Your Risk Appetite?

Suppose you arrive at your dentist’s office for an appointment. Before escorting you to an examination room, the receptionist asks what your pain appetite is. That afternoon, you head over to the Apple store to buy the latest iPhone. A sales clerk at the front...
How To Start A New Risk Management Job

How To Start A New Risk Management Job

You finally did it! You landed that senior risk management position at a fabulous firm. The job search took a while, and the vetting was intense. But you made the cut. They chose you! A bigger challenge is yet to come. Starting a new job is exciting. It can also be a...
How to Measure VaR for a Pegged Currency

How to Measure VaR for a Pegged Currency

On Friday, I wrote a lighthearted piece challenging criticisms of value-at-risk. The Swiss had abandoned their currency peg; people had lost money; and VaR was being blamed—again. My message was essentially this If your VaR measure wasn’t flashing red alerts...
Snappy Comeback to Latest Criticism of VaR

Snappy Comeback to Latest Criticism of VaR

Last week, the Swiss pulled their peg, and swissie soared. Part of the fallout—surprise, surprise!—is criticisms of value-at-risk. This time The Economist is leading the charge, writing: … Another likely casualty is the ‘value-at-risk’ models banks...
A Revelation

A Revelation

I have written about it before, and I am sure I will write about it again. … how financial risks that devastate firms aren’t random occurrences, as if the gods on Olympus toss dice to determine a company’s fate. No. There are causes. And these are usually...
Is Risk Management a Job or a Career?

Is Risk Management a Job or a Career?

There are few life decisions as consequential as your choice of career. Get it wrong, and you’re in for a world of discontent. Perhaps you currently have a risk management position and are wondering if you can make it a career. Or maybe you are just starting out...