So disappointed by risk management professionals

[pingu]

But still, VaR is the fundamental technique used in risk management. I would expect anyone working in RM to understand the logic behind it, not just some manual calculation or drag some number out from a system

a massively flowed technique which is a problem. Some people would rather see VaR go away when it comes to risk management.

 

[yetanotherquant]

But what suprised me was the fact that these risk management guys even very senior risk managers don't have a clue of the basic statistical and mathematical theories behind the calculation of value-at-risk (parametric VaR in particular). I am just so suprised and disappointed about this.

For very seniors it is not necessary. They have juniors to do the calculations
(And I am saying this 50% kidding, 50% seriously).

I wonder if the risk management people who are paid to mange risk are capable of doing their job without a quantitative background.

Yes. For example those, who study balance sheets.
The main skill here is to read between lines.

 

[bigbadwolf]

Otherwise, they are just some puppet whose existence is only to deceit regulatory bodies into believing the bank is managing risk, but in fact it is not.

Ain't that the truth?

 

[TehRaio]

This sounds like another "I'm the smartest guy I know" post. For various hopefully evident reasons, I am often skeptical of this type of post.

perhaps finance attracts too many of them?

 

[Daniel Duffy]

For very seniors it is not necessary. They have juniors to do the calculations
(And I am saying this 50% kidding, 50% seriously).




The main skill here is to read between lines.

That's a useful skill to have.

 

[MBA-Trader]

I wonder if people ever wonder why things are the way they are, instead of complaining about them.
Do you think that all these "risk managers" never had the same thoughts that you now have??
Is it possible that there is a reason why business is not academia and most quant or standard finance professors wouldn't cut it in the real world?? A reason other than the conspiracy of mediocre corporate people against them??
First of all, is there respected or other research that proposes something different (that is realistic and applicable) and it is not happening?? (I really don't know, enlighten me.)

 

[jcchien]

there are many kinds of risk managers. the kind you expect are those quantitative types implementing all the math stuffs.

On the other hand, such risk functions have already been so automated to the point where anyone monitoring these systems call themselves 'risk managers'. i think you are in this situation. their main function to generate risk value outputs from the system, checking values and do market surveillance. banks name them 'market risk department'

Yes. It's correct description about "market risk department" in bank.

 

[Ken Abbott]

Wow. This escalated quickly. A few points here:

• Every senior risk manager I know is well-versed in statistics - and I know a few.
• The suggestion that we are there to deceive regulators is simply offensive. I'm glad whoever wrote that doesn't work for me.
• VaR is a relatively minor part of the risk toolkit. It informs decisions. That's all.
• The suggestion that risk managers are automatons is similarly offensive. There are reporting teams, for sure, but all the desk coverage people I know worry about the risk, not simply the numbers.
• The thought that the senior people don't have to know the math is off-base. Their job is to take complex concepts and express them in simple terms. Nearly all of the senior risk people I know are very quantitative.
• If the OP is correct, then this suggests that there are some very good short positions to be taken in financials.

 

[vertigo]

risk managers are the only people who will not be able to tell you what 'risk' is if you ask them.... your problem is that you had high expectations. don't have any expectations about risk managers. however, this does not mean that they are stupid. having high expectations about senior risk managers is even more silly. they are the ones who are stupid enough to have slaved their life away thinking they have built tools to control risk.

risk is not mathematics. mathematics is not risk. you use mathematics to model risk, but those models are crap. VaR itself is crap. you don't need to know mathematics to understand risk... you need to use your brain.

you know, the purpose behind statistics is not to be a genius at standard deviation, time series modelling, parametric VaR, etc... it is to build techniques that can simplify reality, which is complex. this is not wish wash or fluff talk. go read some articles about Fisher, Student, Neyman, Pearson, etc... and you'll get a good feeling for what statistics is. maybe that will help. it seems like you are the one who doesn't know anything about statistics.

 

[Tianyu Li]

Thinking about some directors don't know what R^2 means and what is the difference between R^2 and correlation, but they do spend 15+ years in the product/asset/portfolio and have deep knowledge about them. That's why they need you and you need them.

 

[Omar Felix]

This sounds like another "I'm the smartest guy I know" post. For various hopefully evident reasons, I am often skeptical of this type of post.

Unfortunately your post made the readers feel exactly the same way.