金融风险管理1-Risk Management.ppt

CHAPTER 1 Risk Management Introduction Financial risk management is the process by which financial risks are identified, assessed, measured, and managed in order to create economic value. Introduction Some risks can be measured reasonably well. For those, risk can be quantified using statistical tools to generate a probability distribution of profits and losses. Other risks are not amenable to formal measurement but are nonetheless important. The function of the risk manager is to evaluate financial risks using both quantitative tools and judgment. Introduction Risk that can be measured can be managed better. Investors assume risk only because they expect to be compensated for it in the form of higher returns. To decide how to balance risk against return, however, requires risk measurement. Introduction Centralized risk management tools such as value at risk (VaR) were developed in the early 1990s. They combine two main ideas. ?The first is that risk should be measured at the top level of the institution or the portfolio. ?The second idea is that risk should be measured on a forward-looking basis, using the current positions. Introduction This chapter gives an overview of the foundations of risk management. 1. provides an introduction to the risk measurement process, using an illustration. 2. discussed how to evaluated the quality of risk management processes. 3 integration of risk measurement with business decisions, which is a portfolio construction problem. 4. judging risk management can add economic value. 1.1 Risk Measurement The first step in risk management is the measurement of risk. Consider a portfolio with $100 million invested in U.S. equities. Presumably, the investor undertook the position because of an expectation for profit, or investment growth. This portfolio is also risky, however. The key issue is whether the expected profit for this portfolio warrants the assumed risk. Thus a trade-of