Book Review

Risk Management Reloaded

Innovations in Quantitative Risk Management

RiskNET [Editor-in-chief]09.03.2015, 08:15

Quantitative models are omnipresent –but often controversially discussed– in todays risk management practice. New regulations, innovative financial products, and advances in valuation techniques provide a continuous flow of challenging problems for financial engineers and risk managers alike. Designing a sound stochastic model requires finding a careful balance between parsimonious model assumptions, mathematical viability, and interpretability of the output. Moreover, data requirements and the end-user training are to be considered as well.

The conference "Risk Management Reloaded" was held on the campus of Technische Universität München in Garching-Hochbrück (Munich) during September 9–13, 2013. Thanks to the great efforts of the organizers, the scientific committee, the keynote speakers, contributors, and all other participants, the conference was a great success, motivating academics and practitioners to learn and discuss within the broad field of financial risk management.

The conference "Risk Management Reloaded" and this book are part of an initiative called KPMG Center of Excellence in Risk Management that was founded in 2012 as a very promising cooperation between the Chair of Mathematical Finance at the Technische Universität München and KPMG AG Wirtschaftsprüfungsgesellschaft. This collaboration aims at bringing together practitioners from the financial industry in the areas of trading, treasury, financial engineering, risk management, and risk controlling, with academic researchers in order to supply trendsetting and realizable improvements in the effective management of financial risks. It is based on three pillars, consisting of the further development of a practical and scientifically challenging education of students, the support of research with particular focus on young researchers as well as the encouragement of exchange within the scientific community and between science and the financial industry.

The topic of financial risk management is a subject of great importance for banks, insurance companies, asset managers, and the treasury departments of industrial corporations that are exposed to financial risk. It has been of even greater attention ever since the financial crisis in 2008. Though regulatory focus rose and the requirements on internal risk models have become more pronounced and comprehensive, confidence in risk models and the financial industry itself has been damaged to some extent. We intended to discuss several questions concerning these doubts, for example, whether we need more or fewer quantitative risk models, and how to adequately use and manage risk models. We think that quantitative risk models are an important tool to understand and manage the risks of what continues to be a complex business. However, comprehensive regulation for internal models is necessary. It is important that models can be explained to internal and external stakeholders and are used in a suitable way.

The campus of the university in Garching-Hochbrück was a great place for the conference. The 200 participants, 55 % of whom were academics, 40 % practitioners, and 5 % students, had many fruitful discussions and exchanges during five days of workshops, talks, and great social events. Participants came from more than 20 countries, which made the conference truly international. Due to the broadness of the main theme and the many different backgrounds of the participants, the topics presented during the conference covered a large spectrum, ranging from regulatory developments to theoretical advances in financial mathematics and including speakers from both academia and the industry.

The first day of the conference was dedicated to workshops on copulas, algorithmic differentiation, guaranteed interest payments in life insurance contracts, and LIBOR modeling. During the following days, several keynote speeches and contributed talks treated various aspects of risk management, including market specific (insurance, credit, energy) challenges, and tailor-made methods (model building, calibration). The panel discussion on Wednesday brought together the views of prestigious representatives from academia, industry, and regulation on the necessity, reasonableness, and limitations of quantitative risk methods for the measurement and evaluation of risk. The conference was completed by a "Young Researchers Day" giving junior researchers the opportunity to present and discuss their results in front of a broad audience.

Kathrin Glau / Matthias Scherer / Rudi Zagst (Ed.): Innovations in Quantitative Risk Management, Springer Open, ISBN: 978-3-319-09113-6 (Print) 978-3-319-09114-3 (Online)

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Review details

Author: Kathrin Glau / Matthias Scherer / Rudi Zagst (Ed.) ISBN: 978-3-319-09113-6 (Print) 978-3-319-09114-3 (Online)
Number of pages: 435
Publisher: Springer Open
Place of publication: Heidelberg
Date of publication: 2015

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