Risk measurement under the spotlight

The need for effective risk-return measurement has led to an increase in portfolio management tools. Further technical advances will result in each model coming under greater scrutiny as the market looks for the optimal approach. New York based financial professional, Joe Pimbley looks at how to manage a credit portfolio using credit derivatives.

IF NOT THE OLDEST PROFESSION, the banking business has a long history. In some ways, the core of banking is as it ever was: the banker borrows from retail depositors and invests in retail and commercial projects and institutions. The art and science of this revered business is the management of depositor withdrawal (‘liquidity’) and investment risks vis-à-vis the excess return of investment over borrowing. Bankers take risk and earn the spread.

Though long lived, the banking business is evolving