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How do you really measure market risk?
The theoretical way to answer this question is to list the many risk metrics centered around market risk and price. The unconventional way is to quote Michael Lewis from The Big Short about the usage of price risk and volatility in risk models, "The risk is the stupid trade that should have never happened".
As a practitioner both responses leave a bit to be desired. The theoretical approach is fraught with issues and can lead to uncomfortable silences in boardrooms. The Lewis approach is a great one liner but has no follow through process that can be implemented.
A practical approach sit somewhere in between the two responses. A focus on metrics and measures that track volatility and positions combined with a focus on exposures, limits and reporting hierarchies that allows senior management team to keep an on the sensitivity of their P&L to volatility and market price movements.
Which is where the Sunoida Risk Manager Platform comes in. In addition to meeting regulatory compliance requirements, our platform focus on tools and infrastructure required to graduate from just compliance to risk management.