What is GHQ and how can it be used to solve financial risk analysis problems? How can this ancient mathematical integration technique help risk analysts calculate probability of loss? And how is it different from traditional risk management stress tests? Dr. Joseph Pimbley works through several examples to demonstrate a ... click here for more details.

In the US, to comply with multiple financial reporting standards,all public corporations must use probability to perform fair value calculations. However, the existing probability requirements lack formality and are too opaque. Gordon E. Goodman offers examples of the inconsistent application of probability across different types of financial transactions and suggests ... click here for more details.

Capturing the tail of a credit loss distribution, which requires the calculation of rare events probabilities, is a daunting challenge. Khaled Beshir explains how extreme value theory can be applied to extreme tail modelling and explores the connection between EVT and economic capital.

Critics claim that the volatility smile for options highlights the mathematical flaws of the famous Black-Scholes options pricing model. Pablo Triana argues that while the smile reflects the holes in Black Scholes`s assumptions, it also points to the reason why the model remains so popular in the real world: a built-in ... click here for more details.

Game theory is not without its flaws, but it can be a valuable tool for risk managers. Aaron Brown analyzes some interesting game theory examples and explains how this branch of mathematics can be applied to credit risk, operational risk and market risk.

The US’s problems with Basel II have been well documented, but what is less well known is that the implementation delays have also caused slowdowns in the development of a national credit ratings system. Christopher Whalen believes that America’s Basel II dilemma has not only caused setbacks in the ... click here for more details.

Over the past decade,KyungHwan Kim — a senior market risk manager at SCFirst Bank (the Korean subsidiary of Standard Chartered Bank) — has had a front-row view of regulatory and risk management developments in Asia. In an interview with GRR contributor Robert Bothwell, Kim shared his views on the growth of ... click here for more details.

Risk Intelligence: Learning to Manage What We Don’t Know Author: David Apgar Publisher: Harvard Business School Press,August 2006