Riskology: hedge funds and banks can learn from each other

Banks should have more risk transparency, hedge funds more formal risk management

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Both banks and hedge funds recognise the management of risk as a central business imperative. At a high level, all firms that manage financial assets share a key objective of risk management: to better structure a portfolio of trading securities and/or investment positions to minimise risk taken relative to return obtained. Major sub-objectives are also similar, such as providing analytics that make the nature and size of the main risks embedded in the portfolio reasonably transparent. Also, at