DOCSLIB.ORG

The Advanced Risk Accounting and Economic Profit Masterclass 2017

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Advanced Risk Accounting and Economic Profit Masterclass 2017 THE ADVANCED RISK ACCOUNTING AND ECONOMIC PROFIT MASTERCLASS 2017 19 - 20 June 2017 |Park Royal Hotel, Singapore contact Eric Khoo Tricia Lim (65) 6444 9049 | (65) 8383 2480 (65) 6444 1644 Designed by Freepik [email protected] [email protected] CT Hub, 2 Kallang Ave, #07-26, Singapore 339407 INTRODUCTION Accounting is focused on reporting the past which is only a fraction of what matters to banks’ boards, management and stakeholders. They have an equal need to be informed about what is likely to happen in the future. More specifically, they need to know: how much risk a bank ac- cepts as it strives to create shareholder value; what is the probability of accumulated risks turning into losses if operating conditions change, for example, in a severe recession; and what will be the likely scale of such losses. Accounting standards, such as IFRS, are not designed to provide such risk-based information. CEOs and CFOs are becoming increasingly concerned at the absence of structured enterprise level risk reporting that reliably informs them of the extent to which a bank’s risk position is endangering its financial condition. Their response is to challenge accountants and risk managers to find ways of risk-adjusting accounting profit to report economic profit with the aim of making it the primary metric on which banks’ financial performance and condi- tion is evaluated. A key but missing input to the calculation of economic profit is explicit, standardised and comparable measures of banks’ exposure to all forms of risk. This still missing input explains why banks have made such little progress in this area to date. ————————————————————————————————————————————————— THE MASTERCLASS The Pinnacle Training Group is pleased to present a Risk Accounting and Economic Profit Masterclass directed by Peter Hughes. Peter currently leads a team of researchers that has successfully codified a new accounting technique ‘Risk Ac- counting’ that incorporates a revolutionary risk exposure measurement method. In 2016, he and colleagues published the results of their research which was widely acknowledged by leading academics and practitioners as a major step towards the integration of risk and accounting data in a common, risk-adjusted reporting framework. In this masterclass, Peter will use a detailed case study to demonstrate how Risk Accounting is used to calculate economic profit which, in turn, provides the foundation on which accounting-based enterprise risk management (ERM) systems can be constructed. ————————————————————————————————————————————————— COMMENTS ON RISK ACCOUNTING The comments below are extracts from the Journal of Risk Management in Financial Institutions that reported the reviews conducted by leading academics and practitioners of the Risk Accounting method: “The integration of accounting and risk measures (both economic and regulatory) makes an important contribu- tion to making risk-adjusted returns transparent” “…represents a sizeable step forward in the search for a practical global solution to enterprise risk management (ERM)” “…the London Whale trading loss… Here, the (method) would bloom” “…a very useful conceptual framework that could serve as a baseline for fulfilling the needs of BCBS 239, with a relatively simple to implement approach” “…the first mechanism proposed to integrate the major components of risk in a large institution” “…(the) proposed framework is both novel in addressing the limitations of existing ERM risk measurement frameworks and practical in adapting the control and reporting frameworks that already exist in accounting and general ledger systems” “The framework… harmonizes all quantifiable risks and valuation uncertainties into one consistent framework without getting bogged down with specific risk models, methodologies and calibrations” “…(the) approach could be a meaningful way of establishing a common metric for operational risk, an area in risk management which, after many years, is still lacking analytical rigour” 1| The Advanced Risk Accounting and Economic Profit Masterclass 2017 DAY 1 9.00 - 9.15 1.00 - 3.00 Introduction & Welcome Emerging Risk and Accounting Practices and Standards 9.15 - 10.30 The Status of Accounting and Risk • An overview of key post-crisis regulatory Management Systems papers on risk control & reporting: • An analysis of the financial crisis and its • Risk data aggregation and risk reporting causes (BCBS 239) • The regulatory framework: balancing risk • Understanding systemic risk and its sensitivity, simplicity and comparability causes (BCBS 258) • Principles for an effective risk appetite • Unexpected losses and their impact framework • The post-crisis shift in regulatory focus • An overview of cross-industry risk from ‘capital at risk’ to ‘firm at risk’ management standards: Case Study and Exercise 1: Delegates analyse • COSO: Aligning Risk with Strategy & the risk environment in which their firms Performance operate and identify the principal threats • ISO 31000: Risk Management – Principles that could give rise to material unexpected and Guidelines losses • Emerging accounting techniques: • Risk accounting 10.30 - 11.00 Break & Networking • Confidence accounting 11.00 - 12.00 • Sustainability accounting Risk Management – Understanding the Basics 3.00 - 3.00 • The essentials of risk measurement Financial Controls and Risk Controls – A Comparison • The building blocks of a risk management system • The financial reporting cycle: the general ledger and sub-ledgers • Expected vs. unexpected losses – interpreting loss distributions • Ensuring financial reporting accuracy: proofs, reconciliations and substantiations • Confidence levels and intervals applied in finance • Financial controls vs. risk controls: status • Basel’s soundness standard: the test of capital and gap analysis adequacy • The evolving accounting systems: finan- cial, management and risk accounting 12.00 - 1.00 5.00 - 6.00 Questions LUNCH Summary of the day 2| The Advanced Risk Accounting and Economic Profit Masterclass 2017 DAY 2 9.00 - 9.15 1.30 - 2.30 The Case for Risk Accounting Risk Adjusted Performance Measurement (RAPM) • Basel’s vision of a simplified regulatory framework • What is risk adjusted return on capital (RA- ROC)? • Observations from industry and academia on the need for accounting reform • Optimising the management of financial re- sources: • The concept of ‘monovalency’ and its appli- cation in control and reporting syste o Capital: Risk Based Capital (RBC) ms • The concept of risk accounting as an exten- o Operating Costs: Activity Based Costing (ABC) sion of management accounting o Liquidity: Funds Transfer Pricing (FTP) • Defining a common unit of risk measure- ment and reporting • Using RAROC for decision support and man- agement reporting • Defining a ‘risk culture’ metric and ensuring that positive cultures evolve • Implementation issues and challenges 9.15 - 11.00 Designing and Implementing an Integrated 2.30 - 4.00 Risk and Accounting System A Risk Accounting Blueprint: A Vision of the Fu- ture • Tying risk accounting and reporting to firms’ official accounting records • Designing a ‘threats’ vs. ‘mitigation’ matrix • Translating accounting and operating data • A common measurement-based framework for: into risk data o Risk appetite setting and monitoring • The role of enterprise architectures and business components in risk accounting o Stress testing and benchmarking • Producing and critiquing risk accounting • The role of Internal Audit reports • Upgrading and institutionalising enterprise risk Case Study and Exercise 2: The ‘Safe Bank’ case management (ERM) systems study: Delegates are presented with sample operating, risk and accounting data from a • Risk adjusting published financial statements commercial / investment bank. Using an Excel version of the Risk Accounting model, they • Integrating finance and risk in business planning develop summary risk reports for the Group and 4.00 - 4.30 by business component, product and risk category. Break and Networking 11.00- 11.30 4.30 - 5.30 Break & Networking Economic Profit, Risk and the Balanced Scorecard 11.30 - 12.30 • Establishing economic profit as the primary perfor- mance metric Risk Management – Understanding the Basics • Integrating economic profit in balanced scorecard • The essentials of risk measurement • The building blocks of a risk management system •Achieving business strategic objectives: aligning • Expected vs. unexpected losses – interpreting performance and risk loss distributions • Confidence levels and intervals applied in finance • The key metrics that demand board and senior • Basel’s soundness standard: the test of capital management focus adequacy 12.30 - 1.30 5.30 - 6.00 LUNCH Questions Summary of the day Course Learning Outcomes Who Should Attend? • UNDERSTAND the causes of misalignments be- tween banks’ risk management and accounting sys- • Head of Internal Audit tems that provided the backdrop to the financial crisis • Head of Balance Sheet Management • EXPLORE how, through the definition of a com- mon risk metric to express all forms of risk, eco- • CFO & Staff nomic profit and risk adjusted return on capi- • CRO & Staff tal (RAROC) can be more precisely calculated • Head of Liquidity Risk • EVALUATE the directional tendencies of regu- latory reform aimed at achieving global finan- • Finance Professionals cial stability and the implications for banks’ • Compliance Managers risk management and accounting systems • Risk Managers • INTEGRATE conventional risk management and • Head of Regulatory
Load more

Recommended publications
  • Nber Working Paper Series Exchange Rate, Equity
    NBER WORKING PAPER SERIES EXCHANGE RATE, EQUITY PRICES AND CAPITAL FLOWS Harald Hau Hélène Rey Working Paper 9398 http://www.nber.org/papers/w9398 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 December 2002 Deniz Igan provided outstanding research assistance. We thank Bernard Dumas, Pierre-Olivier Gourinchas, Olivier Jeanne, Arvind Krishnamurthy, Carol Osler and Michael Woodford for very useful dicussions and Richard Lyons, Michael Moore and Richard Portes for detailed comments on earlier drafts. Thanks also to participants in the 2002 NBER IFM summer institute and in seminars at Columbia, Georgetown, George Washington University and the IMF. We are both very grateful to the IMF Research Department for its warm hospitality and its stimulating environment while writing parts of this paper. Sergio Schmukler and Stijn Claessens provided the stock market capitalization data. This paper is part of a research network on ‘The Analysis of International Capital Markets: Understanding Europe’s Role in the Global Economy’, funded by the European Commission under the Research Training Network Program (Contract No. HPRN(ECT(E 1999(E00067). The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. © 2002 by Harald Hau and Hélène Rey. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including, © notice, is given to the source. Exchange Rate, Equity Prices and Capital Flows Harald Hau and Hélène Rey NBER Working Paper No. 9398 December 2002 JEL No. F3, F31, G1, G15 ABSTRACT We develop an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading.
    [Show full text]
  • Risk Management Through Derivatives Securitization
    Illinois Wesleyan University Digital Commons @ IWU Honors Projects Business Administration 2007 Risk Management through Derivatives Securitization Stefan Filip '07 Illinois Wesleyan University Follow this and additional works at: https://digitalcommons.iwu.edu/busadmin_honproj Part of the Business Commons Recommended Citation Filip '07, Stefan, "Risk Management through Derivatives Securitization" (2007). Honors Projects. 11. https://digitalcommons.iwu.edu/busadmin_honproj/11 This Article is protected by copyright and/or related rights. It has been brought to you by Digital Commons @ IWU with permission from the rights-holder(s). You are free to use this material in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/ or on the work itself. This material has been accepted for inclusion by faculty at Illinois Wesleyan University. For more information, please contact [email protected]. ©Copyright is owned by the author of this document. Risk Management through Derivatives Securitization Stefan Filip Research Honors 2007 Dr. Jin Park Abstract: With the fluctuations in the financial markets reaching tens ofbillions of dollars in just one day, using complex financial instruments instead oftypical insurance could be more effective and cheaper to finance high-severity and low frequency risk exposures. Insurance-linked derivatives such as catastrophes bonds and weather bonds have been used for some time in the United States and European Union. The risks that they cover vary from property catastrophes, weather, general liability, and extreme mortality risks.
    [Show full text]
  • Bank Capital, Securitization and Credit Risk: an Empirical Evidence
    ARTICLES ACADÉMIQUES ACADEMIC ARTICLES Assurances et gestion des risques, vol. 75(4), janvier 2008, 459-485 Insurance and Risk Management, vol. 75(4), January 2008, 459-485 Bank Capital, Securitization and Credit Risk: an Empirical Evidence by Georges Dionne and Tarek M. Harchaoui ABSTRACT This paper is one of the first attempts to conduct an empirical investigation of the relationship between bank capital, securitization and bank risk-taking in a con- text of the rapid growth in off-balance-sheet activities. The data come from the Canadian financial sector. Evidence from the 1988-1998 period indicates that: (a) securitization has a negative statistical link with both current Tier 1 and Total risk- based capital ratios, and (b) there exists a positive statistical link between securi- tization and bank risk-taking. Profit-risk measure is more sensitive than loss-risk measure to the variation in securitization activity. These results seem to agree, during the studied period, with models indicating that banks might be induced to shift to more risky assets under the current capital requirements for credit risk because the regulatory capital levels are considered too high. Keywords: Securitization, credit risk, capital regulation, Canadian financial sector, bank regulation. JEL classification: G18, G21, G28. The authors: Georges Dionne (corresponding author), Canada Research Chair in Risk Management, HEC Montréal, Montreal, Canada, H3T 2A7, CIRRELT, and CREF. Telephone: 514 340-6596. Fax: 514 340-5019. E-mail address: [email protected] Tarek M. Harchaoui, Statistics Canada, Microeconomic analysis Division, R.H. Coats 18-F, Ottawa, Canada, K1A 0T6. E-mail address: [email protected] Research assistance from Rachid Aqdim and Philippe Bergevin is acknowledged.
    [Show full text]
  • Estate Master DF
    Operations Manual 2 Estate Master DF Table of Contents Part I Introduction to Estate Master 6 1 Introduction ................................................................................................................................... 6 2 Program Integrity................................................................................................................................... 6 3 System Requirements................................................................................................................................... 7 Part II Installation 9 Part III Introduction to Development Feasibility Analysis 11 1 Development................................................................................................................................... Margin 11 2 Time Value of................................................................................................................................... Money 11 3 Discounted ...................................................................................................................................Cash Flow Analysis 12 4 Performance................................................................................................................................... Indicators 12 5 Risk Assessment................................................................................................................................... 13 6 Discount Rate..................................................................................................................................
    [Show full text]
  • The Fundraising Responsibility of the Fundraising Needed Has Already Been Raised
    Vol. 21, No. 2, Summer 2012 … find the answer here 2012 Risk Management Webinars: Affordable and Convenient The First Wednesdays webinar series features twelve, 60-minute webinars on topical risk issues. ■ July 11: Reporting Success: What’s the Risk? ■ August 1: Protecting THE Vulnerable Populations ■ September 5: Human FUNDRAISING Behavior and Risk Management ■ October 3: Managing ISSUE Special Event Risks ■ November 7: Crisis Management and Crisis Communications ■ December 5: Calibrating Top 10 Fundraising Risks Your Nonprofit’s Risk Appetite for Nonprofits Each “live” program is packed by Melanie Lockwood Herman with practical information. All The words “fundraising” and “risk relying on donated dollars for mission Center webinars are recorded and management” are rarely used in the fulfillment. Read on to learn about archived so you can watch missed same sentence. One reason the topic the “top ten” fundraising risks facing programs at your convenience. of “fundraising risk” is infrequently mission-focused organizations Visit www.nonprofitrisk.org discussed by nonprofit decision- and strategies for unearthing and and choose the “Webinars” makers may be because responsibility managing the risks in your nonprofit. tab to learn more. for “fundraising” is often assigned to #10 - Ignoring Donor Wishes the development team, while “risk When your nonprofit receives a management” is led by the finance generous donation, it may feel like department or client services team. your “wish” has been granted. But has Yet there are risks associated with fundraising that deserve the continued on page 2 attention of leaders of any organization A publication of the Nonprofit Risk Management Center ©2012 Nonprofit Risk Management Center 15 N.
    [Show full text]
  • UBS Pillar 3 Report As of 30 September 2019
    30 September 2019 Pillar 3 report UBS Group and significant regulated subsidiaries and sub-groups Table of contents Contacts Switchboards Office of the Group Company For all general inquiries Secretary www.ubs.com/contact The Group Company Secretary receives inquiries regarding Introduction and basis for preparation Zurich +41-44-234 1111 compensation and related issues London +44- 207-567 8000 addressed to members of the Board New York +1-212-821 3000 of Directors. UBS Group Hong Kong +852-2971 8888 Singapore +65-6495 8000 UBS Group AG, Office of the 4 Section 1 Key metrics Group Company Secretary 6 Section 2 Risk-weighted assets Investor Relations P.O. Box, CH-8098 Zurich, UBS’s Investor Relations team Switzerland 10 Section 3 Going and gone concern requirements supports institutional, professional and eligible capital and retail investors from [email protected] 11 Section 4 Leverage ratio our offices in Zurich, London, New York and Krakow. +41-44-235 6652 14 Section 5 Liquidity coverage ratio UBS Group AG, Investor Relations Shareholder Services P.O. Box, CH-8098 Zurich, UBS’s Shareholder Services team, Switzerland a unit of the Group Company Secretary Office, is responsible Significant regulated subsidiaries and sub-groups www.ubs.com/investors for the registration of UBS Group AG registered shares. 18 Section 1 Introduction Zurich +41-44-234 4100 18 Section 2 UBS AG standalone New York +1-212-882 5734 UBS Group AG, Shareholder Services 22 Section 3 UBS Switzerland AG standalone P.O. Box, CH-8098 Zurich, Media Relations Switzerland 28 Section 4 UBS Europe SE consolidated UBS’s Media Relations team supports 29 Section 5 UBS Americas Holding LLC consolidated global media and journalists [email protected] from our offices in Zurich, London, New York and Hong Kong.
    [Show full text]
  • Credit Risk Dynamics of Infrastructure Investment
    WPS8373 Policy Research Working Paper 8373 Public Disclosure Authorized Credit Risk Dynamics of Infrastructure Investment Public Disclosure Authorized Considerations for Financial Regulators Andreas A. Jobst Public Disclosure Authorized Public Disclosure Authorized Office of the Managing Director and Chief Financial Officer March 2018 Policy Research Working Paper 8373 Abstract Prudential regulation of infrastructure investment plays close—supported by a consistently high recovery rate with an important role in creating an enabling environment limited cross-country variation in non-accrual events. How- for mobilizing long-term finance from institutional ever, the resilient credit performance of infrastructure—also investors, such as insurance companies, and, thus, gives in emerging market and developing economies—is not critical support to sustainable development. Infrastructure reflected in the standardized approaches for credit risk in projects are asset-intensive and generate predictable and most regulatory frameworks. Capital charges would decline stable cash flows over the long term, with low correlation significantly for a differentiated regulatory treatment of to other assets; hence they provide a natural match for infrastructure debt as a separate asset class. Supplemen- insurers’ liabilities-driven investment strategies. The his- tary analysis suggests that also banks would benefit from torical default experience of infrastructure debt suggests greater differentiation, but only over shorter risk hori- a “hump-shaped” credit risk profile, which converges to zons, encouraging a more efficient allocation of capital investment grade quality within a few years after financial by shifting the supply of long-term funding to insurers. This paper is a product of the Office of the Managing Director and Chief Financial Officer of the World Bank Group.
    [Show full text]
  • Financial Health Economics
    http://www.econometricsociety.org/ Econometrica, Vol. 84, No. 1 (January, 2016), 195–242 FINANCIAL HEALTH ECONOMICS RALPH S. J. KOIJEN London Business School, London, NW1 4SA, U.K. TOMAS J. PHILIPSON Irving B. Harris Graduate School of Public Policy, University of Chicago, Chicago, IL 60637, U.S.A. HARALD UHLIG University of Chicago, Chicago, IL 60637, U.S.A. The copyright to this Article is held by the Econometric Society. It may be downloaded, printed and reproduced only for educational or research purposes, including use in course packs. No downloading or copying may be done for any commercial purpose without the explicit permission of the Econometric Society. For such commercial purposes contact the Office of the Econometric Society (contact information may be found at the website http://www.econometricsociety.org or in the back cover of Econometrica). This statement must be included on all copies of this Article that are made available electronically or in any other format. Econometrica, Vol. 84, No. 1 (January, 2016), 195–242 FINANCIAL HEALTH ECONOMICS BY RALPH S. J. KOIJEN,TOMAS J. PHILIPSON, AND HARALD UHLIG1 We provide a theoretical and empirical analysis of the link between financial and real health care markets. This link is important as financial returns drive investment in medical research and development (R&D), which, in turn, affects real spending growth. We document a “medical innovation premium” of 4–6% annually for equity returns of firms in the health care sector. We interpret this premium as compensating investors for government-induced profit risk, and we provide supportive evidence for this hypothesis through company filings and abnormal return patterns surrounding threats of govern- ment intervention.
    [Show full text]
  • UNIVERSITY of CALIFORNIA Los Angeles the Price Of
    UNIVERSITY OF CALIFORNIA Los Angeles The Price of Risk: What the Rise of Finance Can Teach Us About Justice A dissertation submitted in partial satisfaction of the requirements for the degree Doctor of Philosophy in Political Science by Roni Hanna Hirsch 2017 © Copyright by Roni Hanna Hirsch 2017 ABSTRACT OF THE DISSERTATION The Price of Risk: What the Rise of Finance Can Teach Us About Justice by Roni Hanna Hirsch Doctor of Philosophy in Political Science University of California, Los Angeles, 2017 Professor Joshua F. Dienstag, Chair The dissertation traces the bond between risk and profit from its classical origin to its culmination in contemporary finance. Specifically, it dwells on the interwar period during which securities exchanges were redefined as markets for risk, subject to their own logic of supply and demand. Combining intellectual and institutional history, I show how financial markets emerge in this period as the ultimate means for transferring risks from the risk-averse masses to a handful of risk-takers, significantly skewing the distribution of the rewards of economic production. The pricing of risk, as a technical problem for economists as well as regulators, thus reveals a fundamental political problem that challenges widely held beliefs about the liberal subject, democratic rule, and distributive justice. As I argue in this dissertation, the presence of ii uncertainty reverses liberal commitments to equal dignity and opportunity, justifying new social asymmetries in the name of greater security. Uncertainty is a problem for justice when actions and outcomes are misaligned, and when this misalignment is broadly anticipated by the members of a political community.
    [Show full text]
  • What Is Risk Management? • “…A Discipline for Dealing with Uncertainty.”
    Back to the Future: Long Term Planning and Investment Strategies Audio Dial‐In Information: U.S. & Canada: 866.740.1260 Access Code: 7853891 May 5, 2010 Melanie Lockwood Herman, Executive Director Nonprofit Risk Management Center [email protected] What is Risk? • “Uncertainty is therefore transformed into risk when it becomes an object of management, regardless of the extent of information about probability.” o Michael Power, Organized Uncertainty: Designing a World of Risk Management What is risk management? • “…a discipline for dealing with uncertainty.” • Can we really "manage risk?“ • “I suspect the best we can do is manage ourselves and our organizations using risk measures as imperfect guides.” - H. Felix Kloman 1 To Plan for Today is Human • There are many motivations to focus planning on the short term. These motivations include: . The “crisis management cycle” . The speed with which “things” change . Past experience with forecasting and strategic planning Optimism Bias David Ropeik: . “colors our views of how things will turn out further down the road” . “without the ability to see whether the future will actually be ours, the statistics suggest that we need clearer lenses” Poll Question • In your view, which of the following is the most compelling benefit of long-term planning? 1. It provides a structure and the discipline to think about tomorrow, today 2. It may help us forecast events that could derail our mission 3. It inspires confidence in stakeholders 2 Budgeting Recap • A shared, strategic vision of the future is the starting point for sound budgeting. o Challenges, opportunities, strengths and weakness Budgeting Recap • Getting on the same page is essential: .
    [Show full text]
  • Securitization: Past, Present and Future 1St Edition Pdf, Epub, Ebook
    SECURITIZATION: PAST, PRESENT AND FUTURE 1ST EDITION PDF, EPUB, EBOOK Solomon Deku | 9783319601274 | | | | | Securitization: Past, Present and Future 1st edition PDF Book Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations or other non-debt assets which generate receivables and selling their related cash flows to third party investors as securities , which may be described as bonds , pass-through securities, or collateralized debt obligations CDOs. Williams College, Williamstown, MA. Kothari, V. Front Matter Pages i-xix. Free Shipping Free global shipping No minimum order. Archived from the original PDF on 18 March Here, the originators have more private information about securitised loans and are less motivated to perform their monitoring function efficiently as the risk and ownership have been transferred to investors. After the success of this initial transaction, investors grew to accept credit card receivables as collateral, and banks developed structures to normalize the cash flows. The originator initially owns the assets engaged in the deal. However, due to transit disruptions in some geographies, deliveries may be delayed. Securitization is essentially a bridge between balance sheets and capital markets. Hopefully the retelling will ensure they are not ignored. Size limitations : Securitizations often require large scale structuring, and thus may not be cost-efficient for small and medium transactions. Conflicts of interest can also arise with senior note holders when the manager has a claim on the deal's excess spread. Commercial property Commercial building Corporate Real Estate Extraterrestrial real estate International real estate Lease administration Niche real estate Garden real estate Healthcare real estate Vacation property Arable land Golf property Luxury real estate Off-plan property Private equity real estate Real estate owned Residential property.
    [Show full text]
  • Marginal Decomposition of Risk Measurers
    9130-06_Astin_36/2_04 06-12-2006 12:49 Pagina 375 MARGINAL DECOMPOSITION OF RISK MEASURES BY GARY G. VENTER,JOHN A. MAJOR AND RODNEY E. KREPS ABSTRACT The marginal approach to risk and return analysis compares the marginal return from a business decision to the marginal risk imposed. Allocation distributes the total company risk to business units and compares the profit/risk ratio of the units. These approaches coincide when the allocation actually assigns the marginal risk to each business unit, i.e., when the marginal impacts add up to the total risk measure. This is possible for one class of risk measures (scalable measures) under the assumption of homogeneous growth and by a subclass (transformed probability measures) otherwise. For homogeneous growth, the allocation of scalable measures can be accomplished by the directional derivative. The first well known additive marginal allocations were the Myers-Read method from Myers and Read (2001) and co-Tail Value at Risk, discussed in Tasche (2000). Now we see that there are many others, which allows the choice of risk measure to be based on economic meaning rather than the availability of an allocation method. We prefer the term “decomposition” to “allocation” here because of the use of the method of co-measures, which quantifies the component com- position of a risk measure rather than allocating it proportionally to something. Risk adjusted profitability calculations that do not rely on capital alloca- tion still may involve decomposition of risk measures. Such a case is discussed. Calculation issues for directional derivatives are also explored. MARGINAL DECOMPOSITION OF RISK MEASURES Insurers are finding it increasingly useful to have risk measures to quantify com- pany risk and its components.
    [Show full text]