Risk Management Internship In finance, it’s the best of times, it’s the worst of times It is a special moment to start a career in financial services. We are walking amid the ruins of the previous financial order. Fallen banks, broken markets, negative interest rates, shell-shocked economies and discredited theoretical assumptions. We see the enormous cost and impact to the welfare of society of a less than perfect financial system which has not kept pace with the advancement of our general knowledge and technical capabilities in most other domains.
Top 10 Reasons why Silicon Valley cannot disrupt Wall Street (yet) The Top Ten list of why Silicon Valley cannot Disrupt Wall Street (yet) was published first here in October 2014
Motivation The possibility, heck the inevitability, of Silicon Valley (representing more generally new technology entrants in finance) aiming to disrupt Wall Street (representing generally incumbents) is one of the fascinating memes of our times. Yet while the potential of technology to reshape financial services is not really in question, the manner and timing that this might happen are entirely different stories.
From Big Data, to Linked Data and Linked Models The big data problem:
As certainly as the sun will set today, the big data explosion will lead to a big clean-up mess How do we know? It is simply a case of history repeating. We only have to study the still smouldering last chapter of banking industry history. Currently banks are portrayed as something akin to the village idiot as far as technology adoption is concerned (and there is certainly a nugget of truth to this).
Correlation Radar added to the Dashboard About the Correlation Radar The EU Risk Dashboard is a web app developed by Open Risk to assist with the exploration and understanding of the large number of economic indicators published by the ECB in its Statistical Data Warehouse. The app data are derived from the timeseries available in the Warehouse. Most readings in the currently selected series are monthly or quarterly and are updated when those become available at the Warehouse.
FX Lending Risk A stress testing methodology for analyzing FX lending risk. Extends standard credit risk modelling tools to capture the increased risks of FX lending in a consistent way
Financial Weapons of Mass Destruction Warren Buffet famously declared financial derivatives as weapons of mass destruction (although apparently this did not prohibit him from using them when convenient). The leverage afforded by such contracts, their potential complexity, or simply their novelty which may imply lack of understanding, are some reasons why one would classify them as potential contributors of systemic risk, which is a polished rephrasing of the more popular this sucker is going down quote.
One of the many good suggestions during early beta testing of the Open Risk website was to create a forum for risk management professionals to exchange news, ideas, opinions and general banter about their trade.
This led to the building and rolling out of the Risk Forum, which is now live and ready. Access to the RiskForum for posting requires Open Risk registration.
Update Oct 2021: We are now moving online forums to a new platform
Business Model Risk - The Forgotten Risk Type Sustainable business models that demonstrate adequate profitability over long horizons are key to a healthy market economy. This applies to firms and organizations of any size and in any sector. But how do we determine what is sustainable and how can we tell a risky business structure from a stable one?
On the small-scale end of the size spectrum we have the domain of startups and SME’s.
Risk Management Skills for the Fintech Era Financial services jobs continue being decimated. A recent (as of the initial post date) FT article was a sobering summary of the continuing transformation of the financial sector: 2015 alone has seen more than 10% reduction of the total workforce across large EU/US banks:
As main drivers for this true jobs hecatomb are cited higher minimum capital requirements (that depress Return on Equity and hence require lower costs to restore it to investor acceptable levels), low interest rates that erode Profitability Margins, and a generally subdued economic landscape which reduces Volumes.
Seven Heavens of Finance and the Open Risk API Back-to-basics is not salvation It has become trendy since the financial crisis to be wearing an anti-complexity hat in matters concerning the shape of the financial system. This is an understandable reaction to the entangled constructions that had sprung to existence in the hyper-leveraged markets of the naughty noughts.
Yet shifting through the ruminations and proclamations one cannot help but get the impression that there is a sort of denial of the complexity that underlies the real economy.
Open Risk is proud to be funded by the FIWARE FINODEX accelerator!
Finodex, the European accelerator for ICT projects based on Open Data and FIWARE technologies, has already chosen over one hundred projects via two open calls for proposal.
This week the results of the second call evaluation closed in last September have been published, and 52 projects from a total of 297 have been chosen by a panel of experts.
What Inka quipus teach us about data management Chances are that your knowledge of ancient Peruvian culture is a bit rusty. Maybe you have some vague high-school memories of an extensive but backward empire that was conquered and then asset-stripped by a handful of Spanish conquistadores. Or maybe your best preserved memory is the excitement of reading von Daniken’s speculations that the Nazca lines are extraterrestrial spaceports. But unless you happened at some point later in life to hear about the work of Prof.
Unbundling the Banks: A How-To Guide Talk of unbundling the banks is all the rage these days (if we believe the chatter coming from fintech startups). Yet upon closer inspection one gets the feeling that these optimistic people might not necessarily know exactly what they are trying to unbundle, the true complexity of a medium-to-large bank, which in turn reflects, at least in part, the complexity of our modern Financial System .
Open Source Risk Data with MongoDB and Python Open source software is all the rage those days in IT and the concept is making rapid inroads in all parts of the enterprise. An earlier comprehensive survey by Gartner, Inc. found that by 2011 more than half of organizations surveyed had adopted open-source software (OSS) solutions as part of their IT strategy. This percentage may have currently exceeded the 75% mark according to open source advisory firms.
Open Risk API If you work in financial risk management you will most likely recognize where the following sentence is coming from:
One of the most significant lessons learned from the global financial crisis that began in 2007 was that banks information technology (IT) and data architectures were inadequate to support the broad management of financial risks. This had severe consequences to the banks themselves and to the stability of the financial system as a whole For those lucky few risk managers not being affected by inadequate IT systems, the excerpt is from the Basel Committee’s Principles for effective risk data aggregation and risk reporting (2013).
Resources fo Concentration Risk Management Concentration Risk Management is a staple of risk management. Open Risk developed a unique and novel set of risk management resources to assist with building in-house knowledge for managing credit concentration risks.
Resources range from courses and online manuals to open source calculators and mobile eLearning games. In this post we have a brief summary of what is available, you can find more details by clicking on the embedded links
Risk modeling is as much art as it is science The Zen of Modeling aims to capture the struggle for risk modeling beauty
An undocumented risk model is only a computer program A risk model that cannot be programmed is only a concept A risk model only comes to life with empirical validation Correct implementation of an imperfect model is better than wrong implementation of a perfect model In complex systems there is always more than one path to a risk model There are no persistently true models but there are many persistently wrong models Correlation is imperfectly correlated with causation Nirvana is the simplest model that is fit for purpose Hierarchical systems lead to hierarchical models.
The four stages of social Homo Staticus The web as we now know it burst first into the open in the early nineties. It certainly did not start among the more socially active classes. It was an invention by and for nerdy CERN physicists, to exchange data about elementary particle experiments. But it wasn’t long before academics figured out additional valuable uses of this technology: You could put your face online, along with a CV.
The mystery of the collapsed cathedral You walk to the center of an old city, and you see its glorious cathedral lying in ruins. What in the world has happened here? Your investigative instinct goes into overdrive. This is not supposed to happen. Not in peacetime anyway. How can it be that this magnificent edifice, after gracing the town’s central square for who knows how many centuries, is now little more than a rubble pile in the center of town?
The periodic table of risk elements You know the periodic table of elements, even if you flunked your science courses! It is the large colorful and blocky table that hanged on every school’s classrooms before becoming yet another mobile app. The periodic table is one of the early and iconic achievements of science. It lists all the pure chemical elements found in nature, the building blocks of all possible material substances.
