Industry WIKI

In the fields of actuarial science and financial economics there are a number of ways that risk can be defined; to clarify the concept theoreticians have described a number of properties that a risk measure might or might not have. A coherent risk measure is a function that satisfies properties of monotonicity, sub-additivity, homogeneity, and translational invariance.

In financial mathematics, a risk measure assigns a numerical value to the risk associated with a financial position or portfolio. In financial management and insurance, risk measures are often used to determine capital reserve requirements to mitigate downside risk to make it acceptable to regulators. In recent years attention has turned to convex and coherent risk measurement.

The RiskMetrics variance model (also known as exponential smoother) was first established in 1989, when Sir Dennis Weatherstone, the new chairman of J.P. Morgan, asked for a daily report measuring and explaining the risks of his firm. Nearly four years later in 1992, J.P. Morgan launched the RiskMetrics methodology to the marketplace, making the substantive research and analysis that sat