【FRM Guid】FRM原版书读书笔记 Henry-Liang’s-FRM-Guide-I

1、WWW.HENRYLIANG.COM HENRY LIANGS FRM GUIDE I Henry Liangs FRM Guide?Guide?FRM?2775 ?FRM? ?2017?1221?1554? ?2014?Guide?FRM?2017?2.5? ? Guide? “?”? ? ?“?”? ?“?”?FRM? ?FRM?“?”? ? ?“?”?Guide?“?”? ?“?”? ? ?“?”?“?”? ?“?”? ? ? ?“?”?“?”? ? PREFACE FOR CHINESE READERS ii ? ? ? Guide?“?”? ?Guide? ?Guide? ? ? HENRY LIANG, CQF Algo trader/quant Golden Future Education: senior FRM/CFA lecturer CATTI Certified Interpreter Level II Member of the Translators Association of China Practitioner of Kyokushin Karate

2、iii Last update: 8 Oct, 2017 Painter: Lin Fengmian FOUNDATIONS OF RISK MANAGEMENT 1 4 A. Is Risk Management Useful? Risk management: how firms actively select the type and level of risk that it is appropriate for them to assume. Blames for Risk Management Fail to prevent market disruptions or accounting scandals. Derivative markets make it easier to take on large amount of risk and increase market volatility. Sophisticated financial engineering lead to the violent implosion of firms. Only transf

3、er risks to other firms as a counterparty. Work to the short-term benefit of one group of stakeholders while destroying long-term value for another group. B. What is Risk? EL And UL Expected loss: predictable, incurred in normal times, and already priced into the products. Unexpected loss: risks are lumpy, appear unexpectedly, big enough to upset business plans. Correlation risk is a major factor. Risk management doesnt aim to controlling and reducing EL but to understanding, costing, and managi

4、ng UL. Old Treatment Of Risk Vs Stress Testing Risk managers: move from a historical-statistical treatments of risk to scenario analysis and stress testing. Scenarios: are chosen not on the basis of statistical analysis, because it is both plausible and suitably severe. But the statistical models can also help in pricing risk, eliminate or mitigate the risks. A Risk Manager Job NO: control and reduce EL. YES: understand, cost, and efficiently manage unexpected levels of variability for a busines

5、s. - Measure the UL; - Set sufficient capital to protect against potential UL; RISK MANAGEMENT: A HELICOPTER VIEW SECTION 1 5 - Achieve appropriate return from the risky activities; - Clear communication with stakeholders about the companys target risk profile. C. The Conflict of Risk and Reward Higher rate of return assume more risk Risk: variability that can be quantified in terms of probabilities. Uncertainty: variability that cannot be quantified. A Tradeoff between Risks and Rewards Organis

6、ations with a poor risk management and risk governance culture sometimes allow powerful business leaders to exaggerate returns while diminishing risks. Management might leave gaps in risk measurement that, if mended, would disturb the reported profitability. Risk management failure can be exacerbated by the compensation incentive schemes (bonuses are paid today; costs are pushed into the future). Trading institutions move revenues forward through either a “mark-to- market” or a “market-to-model”

7、 process. Risk can be artificially reduced by applying poor or deliberately distorted risk measurement techniques. Industry regulators can also be drawn into the deception. D. The Danger of Names The classification of risk creates the potential for missed risks and gaps in responsibilities. The management of risk within silos is efficient but wont work together efficiently to manage the risks as a whole. VaR/Economic capital/worst-case scenario analysis have facilitated integrated measurement an

8、d management of the various risks and business lines. Enterprise-wide risk management (ERM) breaks through risk management silos and allows for enterprise-wide risks. E. Numbers are Dangerous too Only some kinds of numbers are truly comparable. Introducing sophisticated models has its own dangers. The VaR measure works well only for: 6 - Markets operating under normal conditions; - Over a short period; - For liquid portfolios. A trader might falsify transaction details, use fictitious trades, or tamper with the inputs to risk models. Risk report readers seldom ask tough questions. All statistical estimation is subject to estimation errors and economic environment changes. Human psychology: people tend to be risk-averse in the domain of gains and risk-seeking in the domain of

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