Perspectives and techniques on model risk management

Vincent Kaminski, RICE UNIVERSITY'S JESSE H. JONES GRADUATE SCHOOL OF MANAGEMENT

08.30 Registration

09.30 Understanding model limitations

• Overly optimistic modeling assumptions in good economic environments
• will lead to unrealistic hedging
• Shortsightedness of risk models
• Can pro-cyclicality be dampened?

10.30 Coffee break

11.00 Overcoming limitations

• Calibration techniques
• Stress testing
• Stressing the parameters is not sufficient, need to question the model
• Dangers of over-reliance on models
• Is VaR sufficient? Do we need better tools?

12.30 Lunch

Effective VaR techniques for the risk manager

Darilyn Jones, Senior Vice President, Risk Control, SEQUENT ENERGY

13.30 Determining the best VaR framework for your organizational set-up

• VaR limits and other internal controls
• Managing the risk of your VaR models
• To hedge or not to hedge: A look at possible applications to reduce downside risk, derive optimal hedge ratio, and measure hedge efficiency

15.00 Coffee break

15.30 Measuring credit risk

• Mathematical tools and models used in credit risk management
• Credit score models
• KMV model
• Estimation of probabilities of default: historical vs. implied probabilities
• Correlation of defaults
• The use of copulas in credit risk modeling

17.00 End of seminar