Measuring risks in the financial services industry

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Copyright: Ganegoda, Amandha Lohitha
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Abstract
Traditionally, financial risk management has mainly focused on the types of risk that can be identified and measured. Many actuarial and statistical theories and models have been developed in the past, to quantify such risks. However, high profile events such as Black Monday, the Asian financial crisis, 9/11 terrorist attacks, the Enron scandal, and more recently the Global financial crisis, has repeatedly proven to the financial world that risks which matter to the stability of financial firms are often immeasurable and unidentifiable. Hence, simply focusing on the measurable risks is inadequate for a sound management of financial risks. In this thesis, we develop a holistic framework to identify (if possible), measure (if possible), and manage the measurable, as well as the immeasurable, and the unidentifiable risks. We identify four realms of financial uncertainties and point out that each realm possesses a unique set of challenges to risk management. Possible tools to grapple each realm of uncertainty and their limitations are discussed by drawing from risk management techniques used in various fields of science and other industries. Then, those tools are applied to two financial problems: 1) estimating operational risk capital for banks by using external data, and 2) assessing the adequacy of the Australian superannuation guarantee system under market uncertainty.
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Author(s)
Ganegoda, Amandha Lohitha
Supervisor(s)
Evans, John
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Publication Year
2012
Resource Type
Thesis
Degree Type
PhD Doctorate
UNSW Faculty
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