Machine Intelligence + Business Intuition
Given the exponential growth in data complexity, how can you, the risk manager, quickly determine the most salient economic factors to include in calculating a bank’s risk exposure? Nowadays, modelling risk is all about “speed, accuracy, and defensibility,” said Patrick Rogers, Head of Marketing at the software company Ayasdi. Risk models must be developed “in a relatively short time window and must be statistically valid.” Since risk models must be defensible to business owners and industry regulators, and simple to explain, the ordinary “black box” machine learning would fall flat, Rogers said. He was the second of three panellists at […]
“Tons of Models, Tons of Variables”
With so many economic variables, and such a wide choice of parameters, do you feel overwhelmed by the task of producing the best financial model possible? Is there a systematic approach to exploring models? “Ever since the 2008 financial crisis, there’s been a focus on stress testing,” which requires robust financial models, said Roderick Powell, Director of Market and Treasury Risk at the consulting company KPMG. He was the first of three panellists at the October 27, 2015, webinar on Effective Risk Models Using Machine Intelligence sponsored by the Global Association of Risk Professionals. “Building those models is a time-consuming, […]
Lagging in Technology Solutions
When it comes to new regulatory requirements for advanced models in financial stress testing, are banks meeting expectations? Over the past two years, relatively good progress has been made in financial models and managing data for stress testing, said Tom Kimner, Director of Global Risk Operations at SAS, “but less progress has been made in technology and reporting.” He was the second of two panellists at a webinar on September 22, 2015, sponsored by the Global Association of Risk Professionals (GARP). He was presenting the findings from a survey report, “Stress Testing: A View from the Trenches,” that was jointly […]
What is Key to Integrating Op Risk?
“It’s critical to unite multiple perspectives on risk,” said Brenda Boultwood, Senior Vice President at MetricStream, “even though approaches to risk and compliance can be very different” throughout an organization. Boultwood was the second of two speakers at a webinar on operational risk held on August 27, 2015, sponsored by the Global Association of Risk Professionals. A common framework will require standard taxonomies, common definitions, and consistent risk assessment across a company, said Boultwood. She sketched out an integrated enterprise risk management (ERM) framework, in which all types of risk share a common hierarchy, common business processes, and a common […]
Effective Risk Reporting
Effective risk reporting means “having the intelligence at your fingertips but exercising the judgment to report only what your company needs,” said Elizabeth Abraham, Director of Professional Services at MetricStream, and the second of two presenters at the June 16, 2015, webinar on Effective Risk Reporting sponsored by the Global Association of Risk Professionals. “Lack of clarity about the reporting objective” is a common barrier to effective enterprise risk management reporting, she said. Make sure you understand what level of information the audience wants. “Data model inconsistencies can lead to an inability to aggregate” the risk estimates, and that’s another […]
Old Dog, New Tricks. List of Tricks
The following are a dozen helpful things I learned at a day-long seminar “The Power of Excel – Part 2,” held on location at the offices of the CFA Society of Toronto on June 10, 2015. The seminar was conducted by Jon Zelman of The Marquee Group. 1. Resist the Mouse 2. Best shortcut of the day 3. ALT-ernative Existence 4. If you filter, use SUBTOTAL, not SUM 5. To count the number of visible rows 6. Searching with multiple conditions 7. D is for Database function 8. “Exact” string matching versus “includes” 9. Multiple conditions for SUMIF 10. Weed out bad parameters early with Data Validation 11. Match and Index functions complement […]
Old Dog, New Tricks. 11 & 12
11. Match and Index functions complement each other “The INDEX function is one of the most powerful but also one of the most complex functions in Excel,” Zelman said. Both INDEX and MATCH are Lookup functions in Excel, so whatever comfort you have with VLOOKUP or HLOOKUP will be useful here. Big picture: you use MATCH to find the coordinates, and you use INDEX to apply the coordinates to find a value. The Match function returns the relative position of an item within a column of data (or a row of data). The syntax is MATCH(lookup_value, Lookup_vector, Match_type). Note I […]
Old Dog, New Tricks. 9 & 10
9. Multiple conditions for SUMIF Let’s say a table has a dollar column you want to add up, but only for entries that have “Industry” = “Finance” whose “Lead Underwriter” is “Morgan Stanley”. You could set up Filter and then use SUBTOTAL, as described above. Another way to get the answer is using a type of SUMIF … the type with multiple conditions. To give multiple conditions to a function such as SUMIF or COUNTIF, use the functions SUMIFS or COUNTIFS instead. The general syntax is SUMIFS(dollar column to be summed, column of name1s, name1 criterion, column of name2s, name2 […]
Old Dog, New Tricks. 7 & 8
7. D is for Database function “Excel’s Database functions are some of the most powerful and underutilized functions in Excel,” Zelman said. Those formulas starting with “D” such as DAVERAGE, DCOUNTA, DVAR, and so on, are all set up to work on a database, which is typically shown as a flat table of numbers and text (rows and columns). The Database functions all use the same syntax: DCOUNTA(Database, field, criteria). He specified four steps for setting up a Database function. Ensure the raw data has column headings. Add a few blank rows (“the sandbox”) at the top of the raw […]
Old Dog, New Tricks. 5 & 6
5. To count the number of visible rows Let’s say you are given an Excel table listing all Winter Olympics events, medals, athletes, and countries. The question might arise: “How many gold medals were won by Sweden?” On the Data ribbon, select Filter. This will put drop-down lists for each column. Make your selection, by setting two filters in the “Medal”= “gold” and “Country” = “Sweden” columns. (Note: to do this only using the keyboard, use Arrow down to move and Tab to select.) In the bottom row, type in “=SUBTOTAL(3,A11:A268)”. In this case, the first argument 3 refers to the […]