Risk magazine - Volume19/No12

A feast of futures

Associated British Foods is significantly exposed to commodity price fluctuations. Anna Gordon-Walker asks the company's finance team how it manages these diverse risks

From VAR to stress testing

Implementation of enterprise-wide VAR models in the 1990s was an important risk management advance, but it's time to rethink some fundamental aspects of how they were designed, argues David Rowe

Sovereign remedy

The World Bank, the lender of last - and often first - resort for the poorer nations of the world, uses derivatives to hedge its own risk book much as any other bank would. But it has another important role in the risk business: acting as an intermediary…

Maximum draw-down and directional trading

Maximum draw-down measures the worst drop in a market in a given time period. Jan Vecer shows how to price and replicate this event. Replication can be naturally linked to existing popular trading strategies, such as momentum or contrarian trading

The saddlepoint method and portfolio optionalities

Richard Martin describes the application of saddlepoint methods to the calculation of tranche payouts and expected shortfall in loss distributions. Aside from computational use in their own right, the resulting formulas motivate a forthcoming discussion…

A telling scope

The number of technical articles submitted each year to Risk has stabilised at around 90, and a high proportion of them are still about credit derivatives and credit portfolio risk analysis. In fact, in our Cutting Edge pages and behind the scenes we…

Operational VAR: meaningful means

Making the assumption that the distribution of operational loss severity has finite mean, Klaus Böcker and Jacob Sprittulla suggest a refined version of the analytical operational value-at-risk theorem derived in Böcker & Klüppelberg (2005), which…

Reconstructing loan management

European banks are taking advantage of the benign credit environment to overhaul the way they manage their loan portfolios. With credit spreads at record lows, banks are increasing their use of credit derivatives for hedging. By Rachel Wolcott

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