Financial Data Science with SAS

Chapter 5: Using Simulations for Risk Management

Using Simulations for Risk Management

Financial risk management is the practice of identifying, analyzing, assessing, and responding strategically to randomly occurring events that have the potential to cause economic harm to the organization. Financial risk can arise out of a myriad of other risk events such as operational risk, market risk, interest rate risk, liquidity risk, credit risk, reputational risk, and more recently identified risk sources such as climate and environmental risks. Data science tools such as simulations are a natural fit for implementing all four aspects of financial risk management.

In Chapter Four, we showed how simulations can be used to study the impact of the quantity ...