April 24, 2007
Carol Alexander Selects Aleksander Petreski to Receive PRMIA Institute Grant
Professor Carol Alexander, Chair of Risk Management and Director of Research at the University of Reading, and recipient of the 2006 Professional Risk Managers' International Association (PRMIA) Higher Standard award, has named Aleksander Petreski as the recipient of the PRMIA Institute academic grant.
The PRMIA Higher Standard award is given to individuals who have significantly impacted the global practice of risk management, provided a substantial contribution to the mission of PRMIA and its members, and who show an ongoing commitment to the highest standards of the profession. As winner of this award, Ms. Alexander was given the opportunity to select a scholar or student in the field of risk management to receive a US$1,000 grant.
Aleksander Petreski is among the first intake on the new MSc graduate programme in Financial Risk Management at the ICMA Centre, University of Reading. Mr. Petreski is leading a research study which is sponsored by the British Foreign Office and administered by the British Council. He holds a BA in Economics from the State University in Skopje and is now Head of the Cash Management Unit in the Treasury Department of the Ministry of Finance, Republic of Macedonia.
Carol Alexander says: "Aleksander was chosen for this award because of his excellent performance on the Financial Risk Management MSc course, and because of his dedication to broadening the PRMIA network and furthering the profession in Macedonia."
Petreski says: "I regard the award as an immense personal satisfaction after the great effort put into the intensive but extraordinarily beneficial studies at the ICMA Centre. I would like to extend my personal and professional gratitude to Professor Carol Alexander for nominating me for this award, and I would also like to congratulate my co-award recipient, Ms. Doriana Ruffino."
Petreski intends to use the grant to obtain the The Professional Risk Manager (PRM™) Certification, the global standard for the world's top financial risk professionals. He explains, "The PRM Certificate proves that a risk manager has the critical knowledge to enter the financial industry. I believe that PRM, being endorsed by the leading financial companies, improves your employment prospects significantly."
To Mr. Petreski’s knowledge, he will be the first risk manager to obtain the PRM Certificate in the Republic of Macedonia. Through his influence and contacts with the financial industry he aims to establish this globally recognized standard in his country. He looks forward to becoming a part of the PRMIA network and to sharing and contributing knowledge for the development of this rapidly growing profession.
Posted by dkoenig at 04:16 AM
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April 11, 2007
PRMIA Institute Awards Best Paper: New Frontiers in Risk Management
At the 2007 Enterprise Risk Management Symposium, the PRMIA Institute announced the selection of Klaus Bocker and Claudia Kluppelberg to receive its 2007 New Frontiers in Risk Management Award for their research paper entitled "Multivariate Models for Operational Risk." Mr. Bocker is Senior Risk Controller at HypoVereinsbank AG in Munich. In this capacity, one of his primary responsibilities is overseeing the quantitative aspects of HVB's economic capital model. Professor Kluppelberg holds the chair of Mathematical Statistics at the Center for Mathematical Sciences at the Munich University of Technology.
Klaus Bocker and PRMIA Institute President, David R, Koenig
This latest paper is a follow-up to Mr. Bocker's and Professor Kluppelberg's research paper published in the December 2005 issue of RISK, in which they presented a simple approximation of operational Value-at-Risk ("OpVaR") for a single operational risk cell. Their earlier body of work, entitled "Operational VaR: A Closed-form Approximation," demonstrated the ability to derive closed formulas for the calculation of univariate OpVaR at high confidence levels - an enhancement over commonly-used "black-box" simulation approaches to this issue since a closed formula generally allows for better analysis of the end result.
Mr. Bocker and Professor Kluppelberg pursued their research in the context of Basel II's revised international framework for capital adequacy, which seeks to more closely align banks' regulatory capital requirements with current and future risks. This revised framework allows for the increased use of internal bank risk assessments and quantification methods that incorporate individual banks' market risk, credit risk and operational risk.
Consistent with the objectives of its revised framework, Basel II introduced the Advanced Measurement Approaches (AMA) for assessing operational risk. Banks choosing to use an AMA to calculate the regulatory capital charge for operational risk must receive prior approval for a comprehensive operational risk measurement system that incorporates methods, instruments, IT systems, and review, control and monitoring processes.
Basel II explicitly refers to the issue of correlation (or more generally, the dependence structure among different operational risk estimates), which might result in a diversification benefit and an eventual reduction in overall operational risk. In "Multivariate Models for Operational Risk," Mr. Bocker and Professor Kluppelberg tackled this problem and investigated how such a dependence structure could be modeled using the novel concept of a Levy copula. By using Levy copulas, the researchers were able to derive closed-form approximations for important examples of heavy-tailed loss severity distributions and dependence structures.
The Levy copula draws on the general theory of Levy stochastic processes, which can be applied to loss distribution concepts employed in the actuarial profession, as well as to operational risk. Use of the Levy copula in this context is an innovative, intuitive approach with significant benefits for enterprise risk management.
The awarded paper has been widely recognized for its contribution to analyzing the behavior of multivariate operational risk. It has been received very favorably in the regulatory and risk management communities, including Deutsche Bundesbank and delegates to the Risk Capital Conference in Paris in 2006. These and other practitioners are very interested in the fact that closed-formula results for OpVaR can often be applied to estimate OpVaR with a low approximation error.
The co-authors look forward to the prospect of applying their generalized model of multivariate behavior to actual internal bank data for statistical estimations and parameterizing a Levy copula in practice. They are particularly interested in seeing the Levy copula becoming more popular in the assessment of operational risk and enterprise risk management in general.
Dr. Dan Oprescu, head of the Risk Management Practice for Financial Architects N.V. (FinArch) and a recognized expert in the field of Enterprise Risk Management, was a member of the selection committee for the PRMIA Institute award. In Dr. Oprescu's words, the Bocker- Kluppelberg paper stood out among its peers for its theoretical contributions to the analysis of ERM by "proposing a new framework that could unify the modelling of different types of event risk - a very important challenge faced by enterprise-wide risk models today. The paper presents the framework in a mathematically consistent fashion and then investigates some of its likely applications, showing risk modellers and managers how the framework could be adapted to individual circumstances."
You can download the paper by clicking here.
Posted by dkoenig at 01:49 PM
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April 06, 2007
PRMIA Institute Awards Best Paper in Derivatives at 2007 Midwest Finance Association Annual Conference
Last week at the 2007 Midwest Finance Association's Annual Conference, the award for Best Paper in Derivatives was given to Beate Breuer, Goethe University, Frankfurt, Nicole Branger, Westfaelische Wilhelms-Universitaet, Muenster and Christian Schlag, Goethe University, Frankfurt for their paper "Discrete-Time Implementation of Continuous-Time Portfolio Strategies". This award is sponsored by the PRMIA Institute.
According to the paper's abstract, since trading cannot take place continuously, the optimal portfolio calculated in a continuous-time model cannot be held, but the investor has to implement the continuous-time strategy in discrete time. This leads to the question how severe the resulting discretization error is. The paper analyzes this question in a simulation study for a variety of models.
Download the paper by clicking here.
The PRMIA Institute will be sponsoring the same award at the 2008 Midwest Finance Association's Annual Conference in San Antonio. For more information on this program, please visit www.mfa-2008.com
Posted by dkoenig at 03:08 PM
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