Handbook of Finance: Valuation, Financial Modeling, and Quantitative Tools

Chapter 5. Risk Management for Asset Management Firms

NOËL AMENC, PhD

Professor of Finance, Edhec Graduate School of Business

Director, Edhec Risk and Asset Management Research Centre

JEAN-RENÉ GIRAUD

Director of Business Development, Edhec Risk and Asset Management Research Centre

LIONEL MARTELLINI, PhD

Professor of Finance, Edhec Graduate School of Business

Scientific Director, Edhec Risk and Asset Management Research Centre

VÉRONIQUE LE SOURD

Senior Research Engineer, Edhec Risk and Asset Management Research Centre

Abstract: The management of financial risks is a much more recent issue for asset management firms than for investment banks. However, it is now unanimously considered to be of significant interest, and risk management is perceived to be a key element in the competitiveness of financial institutions. Similarly to what has happened in investment banking, risk management within the investment management industry has been significantly influenced by regulatory initiatives. For several years now, risk management has been receiving particular attention from professionals and has become an entirely separate and independent activity. The risk department is in charge of managing the activity on an overall and company-wide level and defines the monitoring procedures, the overall policy of the firm, and the recovery plans for the whole of the asset management firm.

Keywords: risk reporting, value at risk, factor models, credit risk, compliance

The management of financial risks is a much ...