What is the difference between risk and uncertainty? Can uncertainty be incorporated into the valuations process of an option pricing model? What challenges does this task present, and what is the best approach for robust option pricing? Professor Mark Salmon and Dr. Stephen Weston discuss the problems posed by uncertainty ... click here for more details.

While many US mortgage owners are feeling the weight of the subprime-driven credit crisis, consumers in Western Europe are now inhibited by penalties tied to prepayment of mortgage loans. Dr. Marco Folpmers identifies the barriers to prepayment of mortgage loans, outlines an optimal prepayment strategy for callable mortgage loans and ... click here for more details.

Commodities like gold, crude oil and corn have been on a huge upswing over the past three years. Dr. Aaron Smith explains how futures markets help risk managers hedge commodity price risk and examines how the price profile of commodity futures has been effected by recent volatility.

Can banks use a simulation approach to model huge derivatives portfolios? Niall Whelan explores the pros and cons of simulation and describes how to simulate FX rates, swap curves and different types of portfolios.

During these turbulent times in the financial markets, it is important to understand how volatility works. Til Schuermann and Peter Tufano summarize the findings of four recent academic research papers on volatility modelling, and the authors of these papers share their thoughts on volatility and risk management.

What lessons about risk management can be derived from chess? Can this game, for example, teach financial risk managers anything about when and how to use leverage? Igor Postelnik compares risk analysis with chess strategy through the eyes of a chess master.

Identifying risk and establishing a risk tolerance are two important items on the checklist of a successful risk measurement plan. Dan Helming and Arnold Schanfield break down the different components of risk assessment and discuss the benefits of qualitative analysis.

Christophe Razaire critiques H. Felix Kloman’s The Fantods of Risk: Essays on Risk Management.

GARP`s 9th annual convention and exhibition was chock full of interesting risk management news and views. We provide a summary of the highlights, including the winner of the 2007 GARP Risk Manager of the Year award.

Editor`s Letter