Archive for May, 2012

Measuring market risk using historical data: Bogus or not?

Thursday, May 17th, 2012

by Mei Lin Ker

Risk management has become the hottest topic ever in today’s turbulent economic climate. We are now still living in the shadows cast by the U.S. subprime crisis in 2008 which has shaken up the U.S. economy with its powerful negative aftershocks reverberating to the rest of the world. Till now, the U.S. economy is making baby steps in recovering from the economic devastation of the Global Financial Crisis (GFC). As big firms collapsed and mega bailouts ensued, people are asking the fundamental question: Why did this happen? Aren’t companies which use highly sophisticated risk management tools able to foresee the impending downfall and, with the information provided, aren’t their risk managers able to take preemptive measures accordingly? Is there then something wrong with these tools or the risk managers?

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