Tid: 29 augusti 2011 kl 13.15-14.00. (Observera dagen och tiden)Seminarierummet 3721, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!
Föredragshållare: Bastien Grandet
Titel: Sensitivity Analysis and Stress Testing in the Interest Rate Market (Examensarbete - Master thesis)
Abstract Recent improvements in trading techniques increased banks' exposure to market risk. This exposure needs to be managed correctly and properly. Quantifying risk and allocating sufficient capital to absorb potential losses is the main challenge: on the one hand not enough capital can put the bank in danger, and on the other hand too much capital has a negative effect on its competitiveness. It is clear that the upper bound is set by the management according to its own objective on benefits, therefore this report investigates what lower bound should be seen as appropriate The starting point though is to estimate the bank's exposure to moves of the markets parameters, called sensitivity to risk factors. Easy in the past, this first step has become more complicated to complete since the volumes traded have increased dramatically, to a current average of 1 Billion EUR a day on the French equity market for example. The second step of risk management is to estimate potential losses and whether the bank can survive them. Calculations of VaR and Stressed VaR provide an approximation to the amount of capital the bank must allocate whereas stress tests check whether this capital is sufficient under feared economic downturns. These works do not ask for any breakthrough in probability but for a different and in my opinion wiser use of existing knowledges. However risk management is still far from perfect but the current version is young. Research and critical evaluation of current standards will bring about needed improvements. This will be for the best.
|Sidansvarig: Filip Lindskog