ACCU London

Thursday 18th September 2008, 19:00

Andrew Holmes: Value At Risk [Slides] [PDF]

As demonstrated by the Northern Rock collapse and the ongoing credit crunch, management of financial risk is a major issue today. Risk management is now central to the operations of banks and other financial institutions, and software systems are critical for measuring that risk. In this presentation, I introduce financial risk and various ways of trying to quantify it.

Value at Risk (VaR) is now the central risk measure used for financial regulation and measuring market risk. A simple model for calculating VaR will be introduced with an example using BP and British Airways stock prices. The significant limitations of VaR will be considered, particularly the problem of fast changing market conditions as evidenced by the current credit crunch.

Risk management would be impossible without software systems, and firms with the best IT have a significant competitive advantage. The use of IT systems for risk management within firms will be described along with the roles for developers and quantitative developers.

This talk is aimed at a mixed audience and no financial knowledge is assumed.

About the Speaker

Andrew Holmes is a quantitative developer at Royal Bank of Scotland. He previously worked on the firm-wide risk system at Bear Stearns. He has a BSc in Computer Science from Southampton University and is currently studying for an MSc in Finance at Birkbeck, University of London.