The present and future of financial risk management

Alexander, Carol (2005) The present and future of financial risk management. Journal of Financial Econometrics, 3 (1). pp. 3-25. ISSN 1479-8409

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Current research on financial risk management applications of econometrics centers on the accurate assessment of individual market and credit risks with relatively little theoretical or applied econometric research on other types of risk, aggregation risk, data incompleteness, and optimal risk control. We argue that consideration of the model risk arising from crude aggregation rules and inadequate data could lead to a new class of reduced-form Bayesian risk assessment models. Logically, these models should be set within a common factor framework that allows proper risk aggregation methods to be developed. We explain how such a framework could also provide the essential links between risk control, risk assessments, and the optimal allocation of resources.

Item Type: Article
Keywords: economic capital; financial risk assessment; optimal allocation of resources; RAROC; risk control; regulatory capital
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG4001 Finance management. Business finance. Corporation finance
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Depositing User: Carol Alexander
Date Deposited: 17 Sep 2012 11:11
Last Modified: 17 Sep 2012 11:11
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