|Increase work efficiency of management personnel||
|Increase responsiveness to financial market||
|Transparent and systematic management||
|System flexibility and convenience||
Any risk associated with market movement(Market Price, Market Interest, FX) against current position
|Risk Factor||Related Product|
|Equity Risk||Equity, CB, EB, BW, KOSPI200 Futures, Star index Futures, Equity Index Option, Option, Indivisual equity Option, ELS, Warrant|
|Interest Risk||Bonds, Bonds with option, FRN, CD Futures, KTB Futures (3,5YR), MBS, Forward Rate Futures, Swap|
|Foreign Exchange Risk||Foreign equity, Foreign Bonds, FX futures, FX Forward, Swap, USD/WON Option|
Portfolio , Rate of Return, Risk analysis to mange against Market Risk
|Financial Statement Data Method||Altman Z-score regression analysis, Logit, Probit model|
|Option Model Method||KMV model, Black-Scholes model|
|Economic Indicator Method||Use of GNP changes, equity Index and etc to calculated Probability of default|
|Decision Tree Method||Analyze individual companies by categorizing the entire set into similar groups|
|Neutral network Method||Estimation of default probability using linear, nonlinear, and neural networks|
|Mathematical Method||Linear Programming, NON-Linear Programming|
Manage Risk Factor by rate of return and volatility of the market
|Rate of Return||Equity||Use log rate of return|
|Interest||Since the interest rate itself is has the nature of the rate of return, the yield rate of the interest rate is calculated by subtracting the previous day's interest rate from the todays’ interest rate|
|FX||Use log rate of return like equities|
|Dispersion Covariance||SMA||A method of estimating the volatility by setting a moving window for a certain period and calculating a simple moving average value during the period|
|EWMA||Assign a high weight to recent data and assign a low weight to older data to estimate volatility|
|GARCH||Risk Factor Model of time-series data on rate of returns in terms of conditional dispersion|
|Yield Curve||Bootstrap Method||Generate yield curves sequentially in expiration order based on market data composed of Term Structure|
|Levenberg Marquardt||create curves using the Optimization Method through the entire configured market data|
|Equity Beta||Standard||Calculating the equity beta by generating the correlation coefficient from the two same time series data, the beta is calculated based on smaller set amount of data|
Interpolation MethodLinear Interpolation) and Cubic Spline Interpolation
Market risk management consists of processes: data acquisition, data analysis, result data and screen display
Risk associated with Portfolio management and Return is managed though Risk analysis and Pricing
By implementing VaR,
The portfolio returns from time t to time t + 1 are as follows
The weights (Wi,t) are given at the beginning of the period and sum to 1. The expected returns of the portfolio are as follows.
The variance of the portfolio includes not only the risk of individual assets (securities)(σ12) but also the covariance(σij) between assets.
If the correlation is low or the number of assets increases, the risk of the portfolio decreases, but the VaR of the portfolio that does not consider the dispersion effect is the sum of the individual VaRs.
The back test for verifying the model is to verify the conformity through comparison of the P/L generated under the confidence level, and to extract the P/L data, back test, documentation and report to the supervisory authority.
By basic input information for VaR calculation, the market VaR screen is able to provide position information, market risk information and VaR information by risk factor.
Comparative graphic analysis of different asset management companies, position information by fund, market risk and risk factors
Market risk analysis summary screen provides position information, market risk information, and VaR information by risk factor through basic input information required for VaR calculation.
Various Closed-Form Solution Secured