Wednesday, November 19, 2014

Risk Management

Risk Management

Risk Management System
Risk Management System explain image
Risk Management Process
Risk Management Process explain image
Pre-Step
  • Analysis and Review on intrinsic risk of products
  • Adjustment and allocation of limits for issuer and counterparty
  • Stress Testing in consideration of market variables
Mid-Step
  • Review whether stocks in universe are invested.
  • Hedge Ratio
  • Tracking Error considering benchmark
  • Check whether various kinds of limits such as issuer, counterparty, duration, liquidity are in compliance
Post-Step
  • Counteraction and review infringements
  • Evaluation of management performance, analysis of factors and feedback
Risk Management Method
Market RiskCredit RiskLiquidity Risk
Definition
  • Change of market price by the movement of financial variables such as interest rate, Stock price, exchange rate
  • Risk that a contract cannot be executed or be delayed due to deteriorated credit status or bankruptcy
  • Risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit)
Measurement Index
  • Index related to volatility and sensitivity(Duration, SD, Beta...etc)
  • Perfomance and Contribution by sectors and stocks
  • Absolute performance compared to benchmark and relative performance within peer group
  • Investment universe
  • Credit Rating Trend
  • EDF, IDP
  • Term Structure of holding securities
  • Cash available to asset
  • Investment limit by sectors and stocks
Management Method
  • Review whether investment made accordding to investment strategy (Duration, beta..)and house view determined in IC
  • Feedback by regular performance evaluation (compared with BM and peer group)
  • Monitor and control trade or investment that has discrepancies with market trend
  • Evaluation of structured securities Estimation of potential loss by simulation
  • Review whether investment made on stocks in pre-verified Investment universe
  • pre-analysis and control of companies that credit event could occur
  • Recommendation on not investing in potentially insolvent companies
  • Analysis on risk enhacement structure for ABS investments
  • Review and control investment portion of specific sector or stock and analyze term distribution by management asset of fund or product type
  • Monitor the liquidity of holding stocks
  • Monitor daily redemption
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