Risk Management Task Force

Risk Management
Task Force

Risk Management Metrics (RMM) Subgroup Minutes

Risk Management Metrics
April 13, 2004
12:00 p.m. Central Time

Participants: Fred Tavan (Leader), Julie Perks, David Ingram, David Rhum (CAS), Emilie Gilde, Steve Craighead, Greg Sloan, Richard Goldfarb (CAS), Greg Campbell, Glenn Meyers (CAS).

Discussion on Risk Metrics
David Ingram did an investigation of the types of risk metrics presented in the "Risk Management" book by Crouhy. He has found the following risk metrics in the Crouhy reference material:

Assets to Capital multiple
Credit VaR / Delta VaR
Distance to default (KMV)
Expected default frequence
Gross Replacement Ratio
Hedge Ratio
Parameteric VaR
Monte Carlo VaR
Volatility
Greeks
Credit Ratios (e.g. EBIT, Interest Coverage, etc.) mainly for
non-financial sector

The risk metrics above cover mainly Credit and Market risks, and the above information will be added to the database.

There was talk about what direction the CAS was taking with respect to ERM on its exams. The CAS syllabus committee has looked at different papers and they expect to cover material on each of Operational, Credit and U/W risks. There is an initiative to look into Operational risk. There is also an initiative to look at a DFA course that will be required to become FCAS and this is going to the Board in May.

Other sources of material that can be investigated for risk metrics are:

"Modeling, Measuring, and Hedging Operational Risk" book by Dr.
Marcelo Cruz
Summary on Extreme-value theory posted at the SOA website
www.gloriamundy.org
www. risklab.ch
E-risk website
www.riskglossary.com

Emilie and Greg will investigate the book by Cruz and report back on their findings at the next call. Glenn will report back on risklab website.

There was discussion around the lack of granularity for operational risk in the AAA risk management framework. Fred will look into how we can extend the AAA operational risk category to include other subcategories seen in other frameworks.

Next Call
The next call will be on May 4th at 1PM EST (noon central).