Agenda

Dag Wright, Sales Director, RiskMetrics Group

Different Monte-Carlo simulation approaches have different stability properties in the CreditMetrics framework. We investigate the impact of various correlation matrix decomposition methods on the stability of VaR estimates and the link between the use of standard methods and time-varying simulation errors. We propose an approach which is robust under moving the historical data window.

Danielle Shi, Researcher, RiskMetrics Group
Daniel Straumann, Senior Researcher, RiskMetrics Group

Risk management in central banks’ investment operations has traditionally focused on market risk rather than credit risk. However, the diversification into “non-traditional asset classes” by larger central banks has brought the realisation that credit risk management is becoming more and more important. The presentation addresses the challenges of credit risk management against the background of unusual portfolios, high ratings, low durations and lack of data, and shares credit risk lessons learnt from a central bank perspective.

Han van der Hoorn, European Central Bank

Often, credit risk practices in the front and middle office lack integration. Here, we discuss the relationship between the treatment of credit risk in the front office and middle office with regard to operational and pricing aspects. We also explore the consequences of the lack of integrated approach to credit risk between the two functions.

Ran Fuchs, Head of Credit Risk, RiskMetrics Group

A decade ago, the integration of market and credit risk was seen as the great challenge in risk modelling. While advances have been made, new challenges have emerged. Some of these are due to the evolution of the marketplace, particularly default risk in trading portfolios, while others, in particular the persistent cultural divide between credit and market risk groups in banking, are still as prevalent as a decade ago. Here, we will discuss which challenges have been solved, which have emerged, and which have been ignored for too long.

Christopher C. Finger, Head of Research, RiskMetrics Group

Credit crisis – what went wrong? Speakers present their views, audience discussion