Risk Management

Consulting

Risk Management....

Most firms have their own (or third party) risk management systems in place. However, these often do not give adequate coverage to critical elements of the risk management process and can result in catastrophic exposures under extreme market conditions. Our review of your risk management systems will typically focus on a number of such critical areas:

Model Risk

We assess the firm's exposure to the use of inappropriate mathematical models in the pricing and hedging of investment portfolios. Where appropriate we will develop alternative models which provide a more realistic and robust mechanism for evaluating investment portfolios and their risk factors.

Liquidity Risk

We use market impact models to assess the firm's exposure to deteriorating liquidity under adverse market conditions.

Volatility Risk

We examine the assumptions made about asset volatilities and correlations in the existing risk management systems, which are often only realistic under normal market conditions. Where necessary, we will develop more sophisticated volatility models to give a clearer picture of the risk profile of the firm's investment strategies.

Extreme Market Analysis

We use our proprietary CrashMetrics methodology to assess the firm's exposure to extreme market moves and develop optimal hedging strategies designed to provide adequate downside protection under abnormal market conditions.

Scenario Analysis

We use a variety of simulation and non-linear modeling techniques to assess the likely performance of investment strategies under market conditions which may not as yet have been realized in practice. This enables us to identify stress points in the risk assessment process and suggest appropriate procedural changes or new hedging mechanisms.