Risk management in the light of current global financial meltdown

Master's Thesis , 2009 , 60 Pages

Business economics - Business Management, Corporate Governance

The study illustrates the poor risk management by financial institutions which have resulted in the global financial meltdown. The reality of practical risk management is much complex involving issues from regulations to innovations. There are a number of issues which are interconnected and financial innovations have tied everything together in such a way that it has created a huge systemic risk for the whole financial system. The evaluation of the failed risk management which was practiced in reality is the focus of this dissertation. The dissertation begins with the established risk management theories and different types of risks that can be identified. The models that are critiqued in the study are widely used by present financial institutions. The issue of subprime crisis which eventually led to the global financial meltdown is something not found directly in risk management theories. Further insight is provided with two case studies. Solution to the issue is deliberately not suggested as it would be another temporary solution before the next crisis. It is risk managers and top management who has to take rational decisions and carefully analyze their investment decisions.

Contents

Chapter 1 Introduction

Methodology

Chapter 2 Established Theories
2.1 Risk & risk management
2.2 Different forms of risks
2.2(i) Market Risk
2.2(ii) Credit Risk
2.2(iii) Liquidity Risk
2.2(iv) Interest Rate Risk
2.2(v) Off-Balance Sheet Risks.
2.2(vi) Foreign Exchange Risks
2.2(vii) Systemic risk

Chapter 3 Models
3.1 Value at risk (VaR)
3.1(i) Limitations of VaR
3.2 KMV Portfolio Model
3.2(i) Limitations of KMV portfolio model
3.3 Conclusion

Chapter 4 The Crisis
4.1 Overview of the recent crisis
4.2 Different toxic risk management instruments of the new era
4.2(i) Hedge Funds
4.2(ii) Collateralized Debt Obligation
4.2(iii) Structured Investment Vehicle
4.2(iv) Credit Default Swaps
4.3 Seemed to be a Brilliant Strategy

Chapter 5 The Reality Of Practical Risk Management
5.1 Inadequate Risk Evaluation
5.2 Serious Issues
5.2(i) Credit Rating Agencies
5.2(ii) Hedge Funds
5.2(iii) Mortgage Broking
5.2(iv) Liquidity
5.2(v) Capital Adequacy
5.2(vi) Transparency
5.3 Creating Problems Worldwide
5.4 MainCulprits

Chapter 6 Lehman Brothers
6.1 Background
6.2 Post Mortem

Chapter 7 AIG
7.1 Background
7.2 Post Mortem

Chapter 8 Conclusion

Appendix

Glossary

References

Bibliography

• College: University of Glasgow
• Course: M.Sc in Management
• Author: Kaushik Nandan (Author)
• Publication Year: 2009
• Pages: 60
• Catalog Number: V295299
• ISBN (eBook): 9783656938972
• ISBN (Book): 9783656938989
• Language: English
• Tags: risk