Part of the overall calculation of uncertainty according to RiskMetrics recommendations, however, should include a calculation of correlative uncertainty (Finger 2007). The rationale for including this specific uncertainty in calculations is that it helps to account for inaccuracies and inadequacies in the model, determining the level of risk associated with incorrectly defined or changing correlations used by the model in other calculations and definitions (Finger 2007). An accurate calculation of uncertainty and risk will necessarily include a calculation of the correlative uncertainties attendant upon the model and the situation to which it is applied, providing not a necessarily more accurate view of direct risk, but a useful evaluation of the risk prediction's efficacy.
RiskMetrics Calculations: Exposure and Uncertainty
An accurate and well-developed combined understanding of the exposure and uncertainty of a various investment venture or portfolio contributes a nearly complete understanding and assessment of the risks presented by that investment option/portfolio. There is a complex interaction between exposure of cash assets and continuing cash flow and other uncertainties that are facing the company(ies) that make up a given investment or portfolio, and exposure to macroeconomic forces as well as market forces must be considered when attempting to calculate the level of uncertainty inherent to certain levels of exposure in specific instances (Andren et al. 2005). The greater the level of knowledge regarding these forces and their movements, and the effects of these forces on cash flow in a given industry -- i.e. The more effective, current, and accurate the risk analysis model is that is being utilized...
Credit Risk Management Banks are an important part of the economy of any nation. Traditionally, the banks operate as financial intermediaries serving to satisfy the demand of people in need of various forms of financing. Through this, banks enable people to purchase home and businesses to expand. These financial institutions therefore facilitate investment and spending that are responsible for fueling the growth of the economy. In spite of their vital role
Hence, the likelihood of having to repurchase a large amount of repurchases would result. This was increasingly risky as the company spiralled into much lower reserves than it would admit publicly. The increasing risks were recognized by New Century employees. Despite efforts by these employees to suggest changes, the response by Senior Management was generally to reject or ignore these suggestions. Senior Management was therefore fully aware of the increase
Banking Risk AssignmentSummary (300 Words)The assignment requires analyzing five companies with a one million British pound portfolio from the same sector. This analysis is based on market risk based on a paper by Sollis (2009). According to the author, understanding more concerning Value at Risk and applying related techniques will help compute the risks of exposure to a portfolio of real-world financial securities (Acharya). The discussion will be critically on
Both types -- qualitative and quantitative -- have their advantages and disadvantages. One of the most well-known of the quantitative risk metrics is that that deals with calculation of annual loss expectancy (ALE) (Bojanc & Jerman-Blazoc, 2008). ALE calculation determines the monetary loss associated form a single occurrence of the risk (popularly known as the single loss exposure (SLE)). The SLE is a monetary amount that is assigned to
Mashreq Bank UAE Introduction of the company (write about the company and its activities) Mashreq Bank is the oldest bank in the United Arab Emirates. It has provided banking services and financial solutions to its valued customers and enterprises since its inception in 1967. The Mashreq Bank, formerly known as Bank of Oman, was established in Dubai under decree of the Ruler of Dubai, Shaikh Rashid Bin Saeed Al Maktoum; this occurred
The liabilities are subject to reserve requirements, however. This means that the bank cannot have more financial assets than it has liabilities. So debt utilization is an entirely different animal in the banking industry than it is in conventional industries. Therefore, typical debt utilization ratios are of little relevance. Interest coverage is tied to liquidity, and is therefore not measured for banks. The debt-to-equity ratio is measured, however. For Wells
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now