92WaNz9mPeY.pdf - MITOCW | watch?v=92WaNz9mPeY The following content is provided under a Creative Commons license Your support will help MIT

92WaNz9mPeY.pdf - MITOCW | watch?v=92WaNz9mPeY The...

This preview shows page 1 - 3 out of 32 pages.

MITOCW | watch?v=92WaNz9mPeY The following content is provided under a Creative Commons license. Your support will help MIT OpenCourseWare continue to offer high quality educational resources for free. To make a donation or view additional materials from hundreds of MIT courses, visit MIT OpenCourseWare at ocw.mit.edu. KENNETH ABBOTT: As I said, my name is Ken Abbott. I'm the operating officer for Firm Risk Management at Morgan Stanley, which means I'm the everything else guy. I'm like the normal stuff with a bar over it. The complement of normal-- I get all the odd stuff. I consider myself the Harvey Keitel character. You know, the fixer? And so I get a lot of interesting stuff to do. I've covered commodities, I've covered fixed income, I've covered equities, I've covered credit derivatives, I've covered mortgages. Now I'm also the Chief Risk Officer for the buy side of Morgan Stanley. The investment management business and the private equity holdings that we have. And I look after lot of that stuff and I sit on probably 40 different committees because it's become very, very, very bureaucratic. But that's the way it goes. What I want to talk about today is some of the core approaches we use to measure a risk in a market risk setting. This is part of a larger course I teach at a couple places. I'm a triple alum at NYU-- no I'm a double alum and now I'm on their faculty [INAUDIBLE]. I have a masters in economics from their arts and sciences program. I have a masters in statistics from Stern when Stern used to have a stat program. And now I teach at [INAUDIBLE]. I also teach at Claremont and I teach at [INAUDIBLE], part of that program. So I've been through this material many times. So what I want to do is lay the foundation for this notion that we call risk, this idea of var. [INAUDIBLE] put this back on. Got it. I'll make it work. I'll talk about it from a mathematical standpoint and from a statistical standpoint, but also give you some of the intuition behind what it is that we're trying to do when we measure this thing. First, a couple words about risk management. What is the risk do? 25 years ago, 1
Image of page 1
maybe three firms had risk management groups. I was part of the first risk management group at Bankers Trust in 1986. No one else had a risk management group as far as I know. Market risk management really came to be in the late '80s. Credit risk management had obviously been around in large financial institutions the whole time. So our job is to make sure that management knows what's on the books. So step one is, what is the risk profile of the firm? How do I make sure that management is informed about this? So it requires two things. One, I have to know what the risk profile is because I have to know it in order to be able to communicate it. But the second thing, equally important, particularly important for you guys and girls, is that you need to be able to express relatively complex concepts in simple words and pretty pictures. All right?
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 32 pages?

  • Spring '17
  • Jim Angel

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors