Overview

For all financial institutions, calculating day-to-day risk exposure is critical. The classic approach to minimizing the risk of catastrophe hitting a portfolio is to invest in a broad spectrum of assets. If one asset drops in value, another is likely to rise. But in today's complex financial world this method is looking increasingly fragile - if it really is the optimal approach there would surely be far fewer financial failures. In this new reality, how can risk managers successfully manage their business? This title introduces a fresh approach to managing risk in investment portfolios. Up to now analysis has been focused on estimating the potential risks of individuals assets - but far less on the implications for the overall risk of a portfolio. The most common method - value-at-risk - justifies decisions, rather than analyzing the risk an institution should bear. In times of crisis, VAR has often failed, and can be fatal if it is not realized that even a small degree of dependence between seemingly unrelated assets can pose a threat to the overall portfolio. Hidden excess risk is called iceberg risk by the author who explains how to identify and manage it.

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9781587990687

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Kent Osban is a US citizen living in London. He holds a PhD in economics from University of California at Berkeley and has worked for the International Moneary Fund and the World Bank in Washington DC and for Goldman Sachs and Credit Suisse First Boston in London. He speaks fluent Russian. He is currently working as a consultant to Trilogy Advisors LLC, a NY based investment advisory firm, where he manages to hedge fund and is implementing and utilising his theories on iceberg risk.

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