The definitions and descriptions of Risk Management

by 趙永祥, 2017-08-30 00:07, 人氣(1646)

Risk Management

Definition:

In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk.

Description:

When an entity makes an investment decision, it exposes itself to a number of financial risks. The quantum of such risks depends on the type of financial instrument. These financial risks might be in the form of high inflation, volatility in capital markets, recession, bankruptcy, etc.

So, in order to minimize and control the exposure of investment to such risks, fund managers and investors practice risk management. Not giving due importance to risk management while making investment decisions might wreak havoc on investment in times of financial turmoil in an economy. Different levels of risk come attached with different categories of asset classes.

For example, a fixed deposit is considered a less risky investment. On the other hand, investment in equity is considered a risky venture. While practicing risk management, equity investors and fund managers tend to diversify their portfolio so as to minimize the exposure to risk.

The definitions of Financial risk management

by 趙永祥, 2017-08-21 20:53, 人氣(1503)

The definitions of Financial risk management

Financial risk management is defined as the practices and procedures that a company uses to optimize the amount of risk it handles with its financial interests.

Senior leaders of a company that practices financial risk management should produce a written policy on financial risks they are willing to accept and follow that policy.

They should also monitor the risks taken, and release reports on the results of these risks to help with analyzing them.

In financial risk management, it is important that the financial risk management department and the employees who work within it are not supervised by those responsible for making the decisions for the company involving financial risk. This avoids risks of conflicts of interest between the financial risk management department and members of the board of directors or senior management who might try to influence policy with threatened or implied job actions if members of the department do not do what they are asked to do.

Employees in the financial risk management department should not transfer to a department that makes the financial investment decisions for the company. This is another policy to avoid conflicts of interest.

How to write a successful CV?

by 趙永祥, 2017-05-17 09:58, 人氣(1542)

How to write a successful CV?

What is a C.V.?
When should a CV be used?
What information should a CV include?
What makes a good CV?
How long should a CV be?
Tips on presentation
Fonts
Different Types of CV
Targeting your CV
Emailed CVs and Web CVs
Media CVs (separate page)
Academic CVs (separate page)
Example CVs and Covering Letters (separate page)
Further Help

http://www.bbc.com/news/business-15573447

How to write a successful CV

by 趙永祥, 2017-05-17 00:42, 人氣(1326)

How to write a successful CV?

What is a C.V.?
When should a CV be used?
What information should a CV include?
What makes a good CV?
How long should a CV be?
Tips on presentation
Fonts
Different Types of CV
Targeting your CV
Emailed CVs and Web CVs
Media CVs (separate page)
Academic CVs (separate page)
Example CVs and Covering Letters (separate page)
Further Help

附件

1. How to write a successful CV.pdf (323 KB)

The Risk Management Process

by 趙永祥, 2017-03-28 22:49, 人氣(1723)

The Risk Management Process

Risk Management is "the systematic application of management policies, procedures and practices to the tasks of establishing the context, identifying, analyzing, assessing, treating, monitoring and communicating" (AS/NZS ISO 31000:2009).

It is an iterative process that, with each cycle, can contribute progressively to organisational improvement by providing management with a greater insight into risks and their impact.

Risk management should be applied to all levels of the University, in both the strategic and operational contexts, to specific projects, decisions and recognised risk areas. Risk is 'the chance of something happening that will have an impact on objectives'. It is, therefore, important to understand the objectives of the University, work unit, project or your position, prior to attempting to analyse the risks.

A simple process

Risk analysis is often best done in a group with each member of the group having a good understanding of the objectives being considered.

Identify the Risks: What might inhibit the ability to meet objectives? E.g. loss of a key team member; prolonged IT network outage; delayed provision of important information by another work unit/individual; failure to seize a commercial opportunity, etc.Consider also things that might enhance the ability to meet objectives e.g. a fund-raising commercial opportunity.
Identify the Causes: What might cause these things to occur e.g. the key team member might be disillusioned with their position, might be head hunted to go elsewhere; the person upon whom you are relying for information might be very busy, going on leave or notoriously slow in supplying such data; the supervisor required to approve the commercial undertaking might be risk averse and need extra convincing before taking the risk, etc.
Identify the Controls: Identify all the things (Controls) that you have in place that are aimed at reducing the Likelihood of your risks from happening in the first place and, if they do happen, what you have in place to reduce their impact (Consequence). Examples include: providing a friendly work environment for your team; multi-skilling across the team to reduce the reliance on one person; stressing the need for the required information to be supplied in a timely manner; sending a reminder before the deadline; and provide additional information to the supervisor before he/she asks for it, etc.
Establish your Likelihood and Consequence Descriptors: The likelihood descriptors are fairly generic however the consequence descriptors may depend upon the context of your analysis. I.e. if your analysis relates to your work unit, any financial loss or loss of a key staff member (for example) will have a greater impact on that work unit than it will have on the University as a whole so those descriptors used for the whole-of-University (strategic) context will generally not be appropriate for the Faculty, other work unit or the individual. The idea is analogous to how a loss of $300,000 would have less impact on the University than it would for an individual work unit.You will need to establish these parameters in consultation with the head of the work unit.
Establish your Risk Rating Descriptors: I.e. what is meant by a Low, Moderate, High or Extreme Risk needs to be decided upon from the outset.
Add Cther Controls: Generally, any risk rated High or Extreme should have additional controls applied to it to reduce the rating to an acceptable level. What the additional controls might be, whether they are affordable, what priority might be placed on them etc is something for the group to determine in consultation with the Head of the work unit.
Make a Decision: Once the above process is complete, if there are still some risks that are rated as High or Extreme, a decision has to be made as to whether the activity will go ahead. Sometimes risks are higher than preferred but there may be nothing more that can be done to mitigate the risk i.e. they are out of the control of the work unit but the activity must still be carried out. In such situations, monitoring and regular review is essential.
Monitor and Review: Monitoring of all risks and regular review of the risk profile is a key part of effective risk management.

The reference website linkage

http://scu.edu.au/risk_management/index.php/8

Introduction to Modern Portfolio Theory

by 趙永祥, 2017-03-08 07:28, 人氣(1414)

Introduction to Modern Portfolio Theory

The purpose of this article is to provide a brief explanation of Markowitz’s modern portfolio theory and how you can use it to more effectively allocate your investment portfolio.

Perhaps equally important to what will be covered is what is excluded: this is not a mathematical derivation of the model. For a thorough explanation of the math behind the model, see this article in Wikipedia. The objective of this article is to show how you can apply modern portfolio theory in real life to create an optimized portfolio.

Portfolio theory

the study of the way in which an individual investor may theoretically achieve the

maximum expected return from a varied PORTFOLIO of FINANCIAL SECURITIES that has attached to it a given level of RISK.

Alternatively, the portfolio may achieve for the investor a minimum amount of risk

for a given level of expected return.Return on a security comprises

INTEREST or DIVIDEND, plus or minus any CAPITAL GAIN

or loss from holding the security over a given time period.

The expected return on the collection of securities within the portfolio is the

weighted average of the expected returns on the individual INVESTMENTS

that comprise the portfolio. The important thing, however,is that the risk attaching

to a portfolio is less than the weighted average risk of each individual investment.

Introduction

In its simplest form, portfolio theory is about finding the balance between maximizing your return and minimizing your risk. The objective is to select your investments in such as way as to diversify your risks while not reducing your expected return. It is actually simple to apply and effective. While it does not replace the role of an informed investor, it can provide a powerful tool to complement an actively managed portfolio.

附件

1. FRM basic knowledgement-Nature of financial risk.pdf (219 KB)

2. Introduction to Modern Portfolio Theory.pdf (184 KB)

Introduction to Modern Portfolio Theory

by 趙永祥, 2017-03-07 21:53, 人氣(2628)

Introduction to Modern Portfolio Theory

The purpose of this article is to provide a brief explanation of Markowitz’s modern portfolio theory and how you can use it to more effectively allocate your investment portfolio.

Perhaps equally important to what will be covered is what is excluded: this is not a mathematical derivation of the model. For a thorough explanation of the math behind the model, see this article in Wikipedia. The objective of this article is to show how you can apply modern portfolio theory in real life to create an optimized portfolio.

Throughout chapters 1 through 4, we will refer to Excel files that will contain either the templates and the data. We will also include instructional videos that will provide guidance on using the Excel files and applying the concepts behind modern portfolio theory. In Chapter 5, we introduce R–a free open-source tool that is a more powerful and flexible alternative to Excel.

We have purposefully started this series by using Excel since most people are the most familiar with this tool. However, we hope that you’ll read our chapter on R (and associated pages, posts, and video tutorials) and find that the process of downloading return data, plotting an efficient frontier, and finding the optimal portfolio much easier and faster. In addition, R allows for flexibility that cannot be achieved in Excel. We have provided all of the code necessary to get up and running with R in a matter of minutes. We hope you find our series a compelling reason for using R as an alternative to Excel.

Introduction

In its simplest form, portfolio theory is about finding the balance between maximizing your return and minimizing your risk. The objective is to select your investments in such as way as to diversify your risks while not reducing your expected return. It is actually simple to apply and effective. While it does not replace the role of an informed investor, it can provide a powerful tool to complement an actively managed portfolio.

Models should never be blindly applied–see any number of articles on the role of models in the collapse of LTCM or other large funds. But an understanding of how the portfolio theory works will enable you to make more informed decisions about which mutual funds to include in your 401k or which ETF’s to buy for your individual investor account.

Your portfolio (401k, IIA, etc.) probably consists of a number of stocks, bonds, ETF’s, and mutual funds. The mix of these assets constitutes your portfolio allocation. How your portfolio is allocated determines its performance. During the first quarter of every year, investors typically spend a few hours reallocating their retirement accounts. Most allocation decisions are based on past performance, gut feelings, or some arbitrary selection process. In this series, we’ll introduce you to the modern portfolio theory and demonstrate how you can use Microsoft Excel to construct an efficient and optimal portfolio.

Definitions and Assumptions

Before we begin to explain portfolio theory and its application, let’s begin by defining a number of key terms. A common nomenclature is essential to correctly interpreting this series.

Return: For many assets, this may include both capital appreciation (the price of the stock rises) and dividends. For debt instruments, the return may include price appreciation (for example, when interest rates fall), the periodic interest payments, or the payment of the principal. Expected returns may be based on historical performance; however, it is important to think critically about whether past performance is likely to continue in the future. (For example, do you really expect to see a 50% rise in technology stocks year-over-year for the next 10 years?)
Risk: This is perhaps the most contentious definition. In the context of this series, risk is the measure of variability in the expected return. We will use simple statistical tools to quantify risk. Risk is typically based on past volatility; however, as with returns, investors should think critically about the assumptions underlying the estimates of risk. If anything, the recent credit crisis has shown that two assets that appeared to be unrelated (uncorrelated, which we’ll cover later) may actually move together quite quickly under certain economic conditions.

Organization of this Series

We’ve organized this site to be accessible to both students and professionals. For students, we’ve tailored the articles to answer common questions and provide context and real-world examples to the theory taught in the classroom. For professionals, we aimed to make this a practical, hands-on, exercise with plenty of actual case studies.

Chapter 1 – Introduction to Portfolio Theory
- A practical explanation of the ideas behind the theory
- Definitions, assumptions, limitations, and other important points to keep in mind
Chapter 2 – Example Portfolio Data Set
- The mix of investments we’ll use throughout the articles to illustrate how to use the theory
- Historical returns and volatility
Chapter 3 – Covariation Analysis–or simply, how related are the movements in individual investments
Chapter 4 – Efficient Frontier
- What is the minimum risk for an expected return
- Comparison with example portfolios
Chapter 5 – Using R as an Alternative to Excel
Chapter 6 – Tracking Portfolio Performance
- How does our mean variance optimized portfolio perform against traditional allocations?

Why is this Important?

So why do you care about modern portfolio theory, a dead economist named Markowitz, or something called an efficient frontier? Simply because you can use this approach to lower your risk (portfolio variance) while maintaining (or increasing) your expected returns. Which of the following portfolios would you prefer?

A mix of stocks and bonds that returned an average of 7% per year, but varied by as much as 10% per year (i.e., returns varied typically between -3% and +17%)
A mix of stocks and bonds that returned an average of 7% per year, but varied by only 2% per year (i.e., returns varied typically between 5% and 9%)

Although an annual return of 17% sounds good, keep in mind that it is also as likely that you’ll lose 3%! A less volatile return of between 5% and 9% may be less exciting but will get you closer to your retirement goals faster.