Philip M Halperin - Scribblings

Definitions for Risk Management

 

FALL GUY

Obs. An antiquated term for Risk Manager.

 

MONTE CARLO SIMULATION MODEL

An Iterative System to apply the ancient and revered principle of Brute Strength and Ignorance to the analysis and prediction of market events.

 

HISTORICAL SIMULATION MODEL

A Learned Method for determining probabilistic boundaries for Tomorrow's market, by evaluating Today's book at Yesterday's price distributions.

 

GARCH

"General Auto Regressive Computerised Hopes" An acronymic Learned System for predicting the immediate past in a nonlinear data-biased Manner.

 

CAPITAL ADEQUACY DIRECTIVE

An improved method of raising technological barriers to entry in financial services, while simultaneously raising the competitiveness level of Large Dinosaurs. Decreed by BCCI (Basle Committee for Continental Institutions).

 

CALIBRATION

A Technique to ensure that the same inaccurate observations are used to mark all desks in a market.

 

OVERLAY

A Management Technique to second-guess the trader in charge and prevent profits from appearing, while still allowing ex-trader Risk Managers to Have Fun.

 

BACKWARDATION

The antonym for "convenience yield".

 

VAR

A very Learned Technique to reduce all of the myriad problems and dangers to a Single Number that Management Can Understand. The modern implementation of the ancient adage that for every Complex Problem there exists a Unique Solution which is elegant, simple, and wrong.

 

RISK CAPITAL

A Modern Management Technique to apportion bankruptcy on an a priori basis among operating units.

 

MARKET RISK COMMITTEE (MRC)

An institution which allows management to Document that it is Doing Something about risk, while allowing the Risk Manager to diffuse responsibility (vide "Fall Guy").

 

GREEKS

A unique and loveable series of partial derivatives of functions on interdependent stochastic variables. Used by Learned Risk Managers in the same way that Lilliputians used thread.

 

CORRELATION

The cop of the quantitative world. Never around when you need it.

 

RELATIONAL DATABASE

Antonym for "Finite Time".

 

THE REGULATORS

The bogeyman of the quantitative world, conjured up by Risk Managers and senior management alike to get agreement for what they really wanted to do All Along. Usage: "The regulators will git ya if ya don't watch out!"

 

ęCopyright 1998

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