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.
Resources fo concentration risk management: Concentration Risk Management is a staple of risk management. Open Riskdeveloped 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
Revisiting simple concentration indexes: Our white paper Revisiting simple concentration indexes reviews the definitions of widely used concentration metrics such as the concentration ratio, the HHI index and the Gini and clarify their meaning and relationships. This new analytic framework helps clarify the apparent arbitrariness of simple concentration indexes and brings to the fore the underlying unifying concept behind these metrics, thereby enabling their more informed use in portfolio and risk management applications.
Concentrating on Concentration Risk: Senior economists such as Ben Bernanke were still studying the Great 30’s Depression when the financial crisis struck in full force circa 2007. Given the complexity of the modern economic and financial landscape compared to the blessed good old days - we have no reports of FWMD (financial weapons of mass destruction) from back then - we can reasonably project that economists will be studying and pontificating on causes and remedies for the current crisis for the next 100 years or so
FuriousBanker(TM) helps you learn risk management concepts in a fun and engaging way. This educational game series for mobiles and tablets is developed by Open Risk to enable modern interactive elearning for people working (or aspiring to work) in financial risk management. The first episode sees FuriousBanker facing The credit detox challenge: Game instructions for FuriousBanker: You Objective: You inherited a pretty toxic credit portfolio and your objective is to reduce the concentration, even while improving your profitability.
We are happy to publish the first installment of a trilogy that focuses on the risk factors that can turn any credit portfolio toxic. The first topic is default correlation, a topic that is both core to understanding credit risk and much misunderstood. Enjoy!
A python module of analytic solutions suitable for testing credit portfolio models has been uploaded in the Open Risk github repository
Building out further the Open Risk Academy curriculum around credit concentration management, we just added a course on sector concentration.
Just added a new course at the Open Risk Academy! The course covers name concentration risk measurement, chiefly the construction of suitable metrics based on portfolio data (Free registration is required for this course)
The first batch of open source demos for credit portfolio calculations is now available here