【正文】 ices. They learn from their errors at least as fast as any regulator could do. And they are being constantly prodded by creditrating agencies and by corporate customers who are ever choosier about the institutions with which they will dealdemanding a topnotch credit rating for longer dated business.b、 大規(guī)模參與衍生物交易的銀行和證券機(jī)構(gòu)并不是其監(jiān)管當(dāng)局所采取明智決策的被動收益人。他們本身具有復(fù)雜的風(fēng)險管理系統(tǒng)來幫助對付突然的價格劇烈波動（某些情況下是其痛苦經(jīng)歷的產(chǎn)物），這一點(diǎn)對于他們的期權(quán)頭寸來說更是如此。他們從其錯誤中吸取教訓(xùn)至少比任何監(jiān)管當(dāng)局都要快。此外，他們還不斷受到來自信用評級機(jī)構(gòu)和公司客戶的巨大壓力，后者在做長期交易時總要求其交易對手具有最高的信用等級。Unit 17 Risky Business[Text]Capital markets have been continually hampered with unpredictable circumstance that can be considered “nonnormal behavior”.Most recently, the horror hedge fund of Long Term Capital Management provides a good example of the volatility of market. These types of nonnormal behavior in capital markets will keep even the best risk managers of the world’s leading banks awake at night. Add to this the advances in telemunication technology and global markets and transactions can originate anywhere in the world in a short time span.As a result, world market prices are more volatile as information travels faster, which makes keeping track of price movements increasingly difficult. Although risk management systems are less helpful in extreme situationswhere the market behaves abnormally and millions of dollars can be lostthey can give risk managers some control over “normal” behavior.Consideration should be given to a system’s limitations。 adherence to procedural issues is needed if these systems are to be reliable and effective in helping risk managers deal with an uncertain future.The immediate objectives for risk management systems are quite clear for banks: manage risk effectively. But what does this mean and how is risk defined.At the most basic level, organizations are motivated and inclined to manage risk because they are unsure of and worried about the immediate future. In essence, they aim to predict the future, for example, determining the ones who are likely to default on loans, and reduce their exposure to such credit risks. Or they could simply try to avoid losses from market risks, which result from fluctuations in financial markets, such as the stock or bond market.There is a concern for liquidity risk as well, where unanticipated market fluctuations could cause some or all of the bank’s liquid securities suddenly to bee illiquid.There three types of risk are considered to be quantifiable risk, where various existing models are bined and implemented into third party vendors (or inhouse) risk management software. The other two remaining types of risk, operational riskloss due to any operational failure or error (. settlement systems), and legal riskloss due to and unenforceable contract, are both not quantifiable (although a few vendors have dabbled in quantifying operational risk).For banks, the ability to control both the predictable and the unpredictable is crucial in determining the amount of capital needed to cover their organization. As a result, there is a plethora of various risk management systems, either implemented within software that has a risk management ponent developed by vendors, or proprietary systems that have been developed inhouse by the large banks.In either case, the latter has its advantages to degree that the systems are customized, and addresses most of the specific needs of each bank, while it is hampered with high costs of development, and difficulty in maintenance. The former, vendor solutions, are usually strong in the area of technological development, customization, and is less expensive, while it is disadvantaged by the fact that some are inadequate to meet all banks’ needs.There is also a distinction between risk management systems and enterprisewide risk management system (ERM). According to Ron Dembo, chief executive officer and founder of risk Management Company Algorithmics, traditional risk management systems were used at desk level, measuring changes, . rate change in price.This is contrasted with ERM systems, which focuses on the net exposure of the firm. ERM systems are forward looking and proactive, and concentrate on what could happen in the future. Another way to look at this is the differences in methodologies。 the marktmarket methodology widely used in many traditional risk management systems is different to that of Algorithmics’ maketofuture methodology in that it focuses on instantaneous or spot information。 historical and current data used to extrapolate into future, essentially guessing.Algorithmics believes it can go one better with its marktofuture methodology, which take into account various strategy or scenarios leading into future, thus being proactive. This general methodology is incorporated into the pany’s latest suite of risk management products, ALGO SUITE .An example of banks being proactive is demonstrated by Whitelight’s (US risk management pany with headquarters in London) partnership with Barclays Bank to provide a centralized risk management strategy. This allows Barclays to enhance the returns of its loan portfolio, identify concentrations of risk and adjust its lending policies in response to changing economic conditions.Barclays risk managers can now undertake sophisticated analysis against “atomic” level data. Other players in the risk management area include MIDAS KAPITI, CATS, KAMAKURA, Reuters, and Font Capital Systems.Implemented in most risk management systems is the mon measurement of Valueatrisk (VAR), which attempts to represent financial exposure to loss in a portfolio of financial instruments. The Tower Group, a US technologyoriented financial research and consulting firm, adds that instead of considering risk as additive sum of individual exposures in a portfolio, VAR methodologies take into account such potential riskmitigating factors as diversification and correlation.Therefore, in a particular portfolio, risk is reduced when it is spread amongst different investments, it is logical that risk managers would use VAR because for market risk measurements, risk numbers are lower and therefore less capital is needed to cover these risks.According to Richard Roby, the Tower group’s senior analyst, m