Risk appetite in practice: vulgaris mathematica
Hassani, Bertrand K
Risk appetite in practice: vulgaris mathematica Bertrand K Hassani - Hydrabad IUP Publication March 2015 - 7-23 p. Paper
The ultimate goal of risk management is generation of efficient income. The aim is to generate the maximum return for a unit of risk taken or to minimize the risk taken to generate the return expected, i.e., it is the optimization of a financial institution’s strategy. Therefore, by measuring its exposure against its appetite, a financial institution is assessing its coupled risk-return. But this task may be difficult as banks face various types of risks, for instance, operational, market, credit, and liquidity, and these cannot be evaluated on a standalone basis; interaction and contagion effects should be taken into account. In this paper, methodologies to evaluate banks’ exposures are presented along with their management implications, as the purpose of the risk appetite evaluation process is the transformation of risk metrics into effective management decisions.
Risk Management--Risk-Return
Risk appetite in practice: vulgaris mathematica Bertrand K Hassani - Hydrabad IUP Publication March 2015 - 7-23 p. Paper
The ultimate goal of risk management is generation of efficient income. The aim is to generate the maximum return for a unit of risk taken or to minimize the risk taken to generate the return expected, i.e., it is the optimization of a financial institution’s strategy. Therefore, by measuring its exposure against its appetite, a financial institution is assessing its coupled risk-return. But this task may be difficult as banks face various types of risks, for instance, operational, market, credit, and liquidity, and these cannot be evaluated on a standalone basis; interaction and contagion effects should be taken into account. In this paper, methodologies to evaluate banks’ exposures are presented along with their management implications, as the purpose of the risk appetite evaluation process is the transformation of risk metrics into effective management decisions.
Risk Management--Risk-Return