Data

Hum a Few Bars and I’ll Fake It

How far can you go at reducing the tedium in your spreadsheet usage? On May 1, 2015, nearly twenty people attended a day-long seminar “Visual Basic for Financial Professionals,” held on location at the CFA Society of Toronto. The seminar was conducted by Andrew Nikolishyn, CFA, of Vesta Solutions. I often use Microsoft Excel as a scratch pad and a tally sheet, but lately I’ve had to do connected tasks on a regular basis, involving recent financial data. I prepare a graph from the data, and I also run a simple present value calculation, to compare with the previous month’s […]

Better Living Through Topology

“It gets downright annoying when I’m just trying to check my e-mail but I get prompted to answer three security questions,” said Alexis Johnson, voicing a concern shared by many in the audience when fraud detection is so overblown it obstructs ordinary use of software. Johnson, Director of Technical Sales at the big data analytics firm Ayasdi, was the second of two presenters at a webinar on the topic “The Fraud Arms Race” sponsored by the Global Association of Risk Professionals on April 21, 2015. When it comes to detecting fraud in big data, “data complexity, not volume, is the […]

Stress Testing Mortgages. Part 2

The team of Scott L. Smith, Jesse Weiher, and Debra Fuller at the Federal Housing Finance Agency (FHFA) use specialized financial models to estimate potential losses. They carried out empirical tests of countercyclical shocks using four different models of mortgage credit risk. This posting continues a February 4, 2015, presentation by Scott L. Smith to an audience of financial risk managers at Global Association of Risk Professionals (GARP). Two models were devised at FHFA, and two are commercially available credit models: one, called Black Knight (formerly LPS-AA), and the other called ADCO Loan Dynamics. The estimated losses were converted to a capital […]

Stress Testing Mortgages. Part 1

“One needs to be careful and not over-reliant on any one model,” said Scott L. Smith, Associate Director for Capital Policy at the Federal Housing Finance Agency (FHFA). He was referring to the financial models used by major financial institutions to estimate potential losses. On February 4, 2015, he was presenting a GARP-sponsored webinar on countercyclical stress tests to set capital requirements. Smith explained how credit risk is measured for mortgages, and described a way to embed stress testing that uses countercyclical concepts. He and colleague Jesse Weiher, Senior Economist at FHFA, performed dynamic stress testing that was adjusted to […]

Cyber Risks: “the New Normal”

“We are living in the middle of a cyber war,” said Christophe LeSieur, Global Practice Lead of Governance, Risk & Compliance (GRC) at CSC. He was the first of two presenters at a webinar on cybersecurity sponsored by the Global Association of Risk Professionals held on December 16, 2014. He described “the new normal” as “an environment of unprecedented tension” whose mega-trends are: social media, information technology (IT) and internet everywhere, proliferating platforms (mobile, bring your own device[BYOD]), and a huge quantity of data. The world is becoming ever more different, and the number of attacks is growing. Just this […]

When Data Is Sparse. Part 2

It’s difficult to model sovereign credit risk for emerging markets using structural models such as the Merton model because “calibration is always an issue,” said Rob Stamicar, Senior Director of Research in Multi-Asset Class Risk Management at Axioma, continuing a theme during the second half of his webinar on December 2, 2014. During the first half, he showed how the probability of default can be used as a common link among the asset classes of interest (bonds, swaps, and equities). In the second half, he focused more on sovereign credit risk. Calculation of sovereign risk could be done directly, “but […]

When Data Is Sparse. Part 1

When modelling risk in emerging markets, are you hampered by sparse data? “Relationships between different asset classes can help measure the sovereign risk in emerging markets,” said Rob Stamicar, Senior Director of Research in Multi-Asset Class Risk Management at Axioma. He was sole presenter at a webinar on December 2, 2014, sponsored by the Global Association of Risk Professionals. When modelling global multi-asset class portfolios, “aggregation can be challenging,” said Stamicar, because the FX rates must also be taken into consideration—the subject for another day. His talk focussed on three asset classes: equity, fixed income, and credit portfolios. Infrequent data, […]

Risk Ratings 2. “Hundreds of Spreadsheets”

“There were hundreds of different spreadsheet templates floating around,” said Christopher Hansert, Product Manager at Bosch Software Innovations, and the second of two presenters at a GARP webinar on the impact of new capital rules on risk ratings, held June 24, 2014. He presented a case study of an unnamed US commercial bank. Due to an acquisition during the period of regulatory change, he said that the bank had a “heterogeneous set of platforms, models, and inconsistent ratings. They wanted one robust and centralized” risk rating system. Inconsistencies in the risk rating process increased the likelihood of error, Hansert pointed […]