Best Practices Driving High Performance Risk Measurement

Barry SchachterHead, Enterprise Risk Management Caxton Associates LLC

April 3, 2001 Barry Schachter/Caxton Associates LLC 2

So Much Data, So Little Insight

Measurement doesn’t equal managementIt’s too easy to create volumes of dataRisk measurement doesn’t require high performance computing for – Complex instruments– Precise estimates– Large portfolios

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Uncertainty and Risk

Eliminate uncertainty to take more riskResolve uncertainty with high performance computing– Timeliness (it’s relative)– Analytics, data mining, visualization– Effective communication

April 3, 2001 Barry Schachter/Caxton Associates LLC 4

Timeliness

User-related issues– Decision horizons– Reporting horizon

Position-related issues– Price volatility– Turnover ratio

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Risk Analytics

VaR and beyondVaR software as computing platformDigging deep for risk insightsPower of a picture

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Communication

Aphorisms that apply– It’s not just the message, it’s also the medium– It’s not what you say, it’s how you say it– Communication is a two-way street

“Stakeholders” of risk knowledge have unique needs and languages

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Conclusion

Focus not on generating numbersResolution of uncertainty drives need for high performance computingTimeliness, Analytics, Communication