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Modeling, Measuring and Hedging Operational Risk Marcelo G. Cruz
Publisher: Wiley

This entails that supply chain executives need to systematically address extreme risks such as hurricanes, epidemics, earthquakes or port closings, as well as operational risks, such as forecast errors, sourcing problems, transportation breakdowns and recall issues. The Chief Investment Office (CIO) was supposed to manage excess cash while minimizing risk using credit derivatives as part of a hedging strategy; instead, their trades became so large that the bank couldn't easily unwind them. Valuation technique that makes maximum use of market inputs and includes recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, and option pricing models. Increasingly, risk management experts and their predictive models of the world determine the “efficient” distribution of resources necessary to respond to existential threats. €�The cost to “Maintaining hardware, software and quantitative models are substantial in themselves, but any unexpected operational costs can be very detrimental.” Another issue that Many hedge funds and private funds tend to be very protective of their positions. 21 August 2003, Exposure Draft Fair Value Hedge Accounting for a Portfolio Hedge of Interest Rate Risk (Macro Hedging) issued for public comment .. For example, risk associated with volatile fuel price can be managed through long-term contracts while fluctuating exchange rates can be managed through a variety of hedging strategies, as we discuss below. This is leading risk management providers to develop innovative methods of delivering their services, and in the process remove the burden of risk measurement from asset managers. Cruz[1] has suggested using the Kupiec Test to backtest operational Risk VaR measurement results. At the bottom of this miscalculation were blunders in the development, testing and approval of a new VaR model to measure the risk of their Synthetic Credit Portfolio. In some Scholes and Merton went on to be directors of Long Term Capital Management (LTCM), a hedge fund that billed itself as “the financial technology company” and based its supposedly risk-free arbitrage trading on “dynamic hedging” strategies derived from the Black-Scholes model. Modeling, Measuring and Hedging Operational Risk Publisher: Wiley | ISBN: 0471515604 | impression 2002 | PDF | 346 pages | 16 mb"Dr Marcelo Cruz is rightfully acknowledged like a wor. Special rules apply to embedded derivatives and hedging instruments. Cruz Modelling (2002), Measuring and Hedging Operational Risk Wiley and Sons,.