Risk Appetite in Practice: Vulgaris Mathematica

Bertrand K. Hassani ()
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Bertrand K. Hassani: Grupo Santander et Centre d'Economie de la Sorbonne

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The ultimate goal of risk management is the generation of efficient incomes. The objective is to generate the maximum return for a unit of risk taken or to minimise the risk taken to generate the return expected i.e. it is the optimisation of a financial institution strategy. Therefore, by measuring its exposure against its appetite, a financial institution is assessing its couple risk-return. But this taskk may be difficult as banks face various types of risks, for instance, Operational, Market, Credit, Liquidity, etx. and these cannot be evaluated on a stand alone basis, interaction and contagion effects should be taken into account. In this paper, methodologies to evaluate banks' exposures are presented along their management implications, as the purpose of the risk appetite evaluation process is the transformation of risk metrics into effective management decisions

Keywords: Risk Management; Risk Measures; Risk Appetite; Interdependencies (search for similar items in EconPapers)
JEL-codes: C10 C65 C80 G17 G21 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014-04
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:14037

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