Best Practices Driving High Performance Risk Measurement Barry Schachter Head, Enterprise Risk Management Caxton Associates LLC

April 3, 2001Barry Schachter/Caxton Associates LLC2 So Much Data, So Little Insight Measurement doesn’t equal management It’s too easy to create volumes of data Risk measurement doesn’t require high performance computing for –Complex instruments –Precise estimates –Large portfolios

April 3, 2001Barry Schachter/Caxton Associates LLC3 Uncertainty and Risk Eliminate uncertainty to take more risk Resolve uncertainty with high performance computing –Timeliness (it’s relative) –Analytics, data mining, visualization –Effective communication

April 3, 2001Barry Schachter/Caxton Associates LLC4 Timeliness User-related issues –Decision horizons –Reporting horizon Position-related issues –Price volatility –Turnover ratio

April 3, 2001Barry Schachter/Caxton Associates LLC5 Risk Analytics VaR and beyond VaR software as computing platform Digging deep for risk insights Power of a picture

April 3, 2001Barry Schachter/Caxton Associates LLC6 Communication Aphorisms that apply –It’s not just the message, it’s also the medium –It’s not what you say, it’s how you say it –Communication is a two-way street “Stakeholders” of risk knowledge have unique needs and languages

April 3, 2001Barry Schachter/Caxton Associates LLC7 Conclusion Focus not on generating numbers Resolution of uncertainty drives need for high performance computing Timeliness, Analytics, Communication