financial risk management
Brief Introduction of Financial Risk Management
Huang Xuan
Financial risk management is an interdiscipline with various researching subfields including the studies of mathematical methods to maximum the profits, quantitative analysis of financial databases and investment decisions. In other words, it is aimed to bridge the gap between mathematical theories and practical financial analysing tools (Nawrocki 1999). It could also be defined as“Living with the possibility that future events may cause adverse effects” (Kloman 1999). Risk and profit are always an integral. The variety of risks including portfolio risk, credit risk and liquidity risk became a financial conundrum which equalled to a group of destructive nuclear bombs hidden in the monetary market. Consequently, the risk management represents the core competence in insurance and banking industries. With the innovation of IT technology, more advanced computer software has been introduced in financial area which results that the risk management has made impressive strides in last decade. As the academic field mature constantly, the abstract mathematical and statistic concepts reifies to accessible programs which could predict the trends of investment returns, for example, the expected earnings at the end of next week after buying certain amount of stock at next Monday (Chapman 1996, iv).
The origin of risk management could date back to the game theories introduced by two French mathematicians, Blaise Pascal and Pierre de Fermat. Hundreds year past, two professors, Fisher Black and Myron Scholes invented the “Black & Scholes Model” to give suggestions to reduce the risk in stock and option trade in 1973. However, the significance of this subject has been underscored after the global financial crash in the 2000s. During the period from 2007 to 2009, the world had suffered from the worst economic crisis since the Great Depression in the 1930s. Thousands of banks, funds and other financial institutes
Huang Xuan
Financial risk management is an interdiscipline with various researching subfields including the studies of mathematical methods to maximum the profits, quantitative analysis of financial databases and investment decisions. In other words, it is aimed to bridge the gap between mathematical theories and practical financial analysing tools (Nawrocki 1999). It could also be defined as“Living with the possibility that future events may cause adverse effects” (Kloman 1999). Risk and profit are always an integral. The variety of risks including portfolio risk, credit risk and liquidity risk became a financial conundrum which equalled to a group of destructive nuclear bombs hidden in the monetary market. Consequently, the risk management represents the core competence in insurance and banking industries. With the innovation of IT technology, more advanced computer software has been introduced in financial area which results that the risk management has made impressive strides in last decade. As the academic field mature constantly, the abstract mathematical and statistic concepts reifies to accessible programs which could predict the trends of investment returns, for example, the expected earnings at the end of next week after buying certain amount of stock at next Monday (Chapman 1996, iv).
The origin of risk management could date back to the game theories introduced by two French mathematicians, Blaise Pascal and Pierre de Fermat. Hundreds year past, two professors, Fisher Black and Myron Scholes invented the “Black & Scholes Model” to give suggestions to reduce the risk in stock and option trade in 1973. However, the significance of this subject has been underscored after the global financial crash in the 2000s. During the period from 2007 to 2009, the world had suffered from the worst economic crisis since the Great Depression in the 1930s. Thousands of banks, funds and other financial institutes