Risk Analysis/Modelling

Risk modelling is the practice of creating financial models that use statistical techniques to quantify potential losses. Such losses could relate to:

  • Market Risk from the change in value of assets due to changes in economic factors such as interest rates or foreign exchange rates.
  • Credit Risk from the change in value of a debt due to changes in the actual or perceived ability of counterparties to meet their contractual obligations.
  • Operational Risk from the risk of loss resulting from inadequate internal processes, people, and systems, or from external events.

Regulation such as Basel II & III & Solvency II has pushed Risk Modelling, to the fore. Having worked extensively in regulated financial service industries we can build risk models to estimate key risk measures such as Value at Risk, Interest Rate Duration & Convexity, Probability of Default, Loss Given Default, Exposure at Default and Operational Risk Capital. We do this using generic modelling tools or statistical modelling tools such as @Risk, SAS or SPSS

Example Project:

Major European Insurer. Providing analytical support for Group Risk function on a number of different projects

  • Changing monthly risk capital reporting pack to make the reporting of market & credit risk more robust and the output more user friendly
  • Carrying out suitability assessment on a number of proposed changes in risk modelling practices
  • Creating a suite of reporting tools to aggregate information from operational loss databases and expert information that was fed into VBA driven Monte Carlo simulation models to calculate capital requirement