Risk Measurement

MNK Risk Consulting > Risk Measurement

With significantly increased regulatory focus on capital adequacy and short- and long-term solvency for banks, insurance companies and investment firms with own trading books, it is crucial to rethink capital planning and risk measurement.  Satisfying regulatory expectations related to capital adequacy requires a move from point-in-time measurement to forward looking risk measurement.

We have acquired international experience and expertise

on the provision of the following core services

Modelling portfolio credit risk

  • LGD estimation
  • Simulation of credit default annual loss distribution and use of several credit risk measures (Vasicek Model, Actuarial Model, other modelling approaches)
  • Facilitate decision making: what part of the portfolio to provide for, what part to allocate capital, what part to hedge or sell, what part to do nothing
  • Evaluation of economic capital models, regulatory IRB programs
  • PDs estimation
  • Implementing or reviewing a risk adjusted credit facility pricing model (for banks)
  • Implementing an Expected Credit Loss Model based on probability weighted forward looking data (IFRS 9 coming into effect as of 1.1.2018)

Modelling market risk

  • Market risk factors (FX rates, stock prices, interest rates, commodity prices)
  • Market Correlations
  • Profit and Loss Distribution simulation and VaR measurement (Monte Carlo Simulation, Variance-Covariance model, Historical Simulation)
  • Marginal VaR and Portfolio rebalancing
  • Portfolio allocation optimisation

Modelling operational risk

  • Specifying data needs
  • Event frequency and loss severity parametric models
  • Operational risk correlations
  • Economic capital models (Monte Carlo Simulation, Extreme Value Theory Model)
  • Evaluation or Development of regulatory AMA (Advanced Measurement Approach per Basel 3) programs

Calculation of Pillar 1 risk-weighted assets. Also see Capital Adequacy

Calculation of Pillar 2 capital needs. Also see Stress Testing

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Please feel free to contact us. We will get back to you within 1-2 business days.

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