Stochastic and Deterministic LGD Loss Given Default Models are different.
Many bankers are unable to understand the different mathematical assumptions that can make the computations.
That is a big risk per se!
#model #Risk #Validation #Creditrisk #FRM
What is a hazard rate assumption?
How can credit risk be modelled using hazard rates?
This is beyond an average #banker.
Most primal bankers only understood the 5 or later the 7Cs of credit.
Accounting, cashflows, creating a charge on assets, foreclosure, special asset mgmt, etc
Actually, Quantitative Risk Management has not helped at all, in my opinion.
Blindly applying maths and statistics has made decision-making worst.
Banking was about relationship mgmt, business model analysis, accounting trickeries, branch operations, etc
Now it's like a lab work
And, yes, Treasury Dealing is not banking!!
Sorry, If I have infuriated anyone by tweeting this.
Dealers are not bankers.
They can be the most annoying people to work with, telephone operators at best, who watch rates on large flat screens.

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More from @SAH16928046

Apr 17
(December 2017) Paul Klemperer "Auction Design in the Financial Crisis" via @YouTube
Monetary Economics is a well-established field.
Central banking practices may differ from what is taught to Monetary Economists.
Because CB is not just an executioner of the monetary policy but is also a banker to the government and the apex bank of the country per se.
Hence, CB Balance sheet expansion and contraction have consequences for the broader economy.
Read 9 tweets
Apr 12
Risk Management is not just about producing tons of reports that nobody wants to read in the office.
I am very angry to note that most of the #ERM/Risk Desks just produce day-end reports, which end up in the dustbin.
Risk Dept. should not be a tick the box function.
what is the point of preparing #VaR Reports, when the fund manager does not understand basic probability?
There is no point in hiring a world-class hard science PhD to do risk management work at financial institutions or elsewhere, if the board members have zero numeracy and data science skillsets, the staff in front and back offices have poor technical and academic backgrounds, etc
Read 8 tweets
Apr 5
Which is a better career option, an #MBA in finance or financial risk management?
I am not an admirer of the MBA Degree Program. So I think I should not be answering this question per se.

But, let me give it a try.
MBA is a professional qualification, unlike MA / MSc / MS / MPhil Degree programs.
How you will benefit from an MBA degree, is entirely up to your understanding of the challenges emerging in the workplace.
MBA Finance is neither a fish nor fowl qualification.
If you would like to learn financial theory, derivatives, risk and economics, you will be better off by doing a proper MS or MSc in Financial Economics or Applied Finance (Financial Engineering).
Read 26 tweets
Mar 29
MBAs and even DBAs find it very tough to publish in high impact factor journals.
Most of the management teaching done at business schools relies on the case study method.
The staff is not conversant with modern statistical and mathematical methods used for writing research papers
My advice to all management studies/ old business school style professors and adjunct faculty members is that they should do MOOCs.
At their age, they cannot enrol in a hard science degree program.
The most worrying thing that I have come across is that departments where full-time teaching staff cannot publish articles/ monographs in top peer-reviewed journals, start publication services of their own to accommodate failure.
In-house Discussion Papers Journal, etc
Read 9 tweets
Mar 28
When financial risk managers/statisticians, etc are computing CV Coefficient of Variation (a relative measure of dispersion/risk) of financial assets, they tend to make certain basic mistakes.
1. They don't compare the average returns between assets
2. They ignore the 0 or - sign
CV computation of asset classes included within the portfolio can be lead to serious statistical errors.
Because when the CV of Portfolio A is compared with that of B, the average returns are not the same, hence the comparison becomes meaningless.
In cases where the denominator of the CV (mean value of the return) is either zero or negative value, the ratio should not be used.
In such cases, the portfolio risk manager should use the standard deviation to compare #volatility estimates across asset classes.
Read 5 tweets
Mar 27
An Economics/Finance PhD is still probably one of the few degrees that provides you with an opportunity to start a career in either academia or elsewhere in the corporate sector, preferably Finance or the Govt Sectors.
But, always try to gain some practical experiences after BS
I don't like this concept of pushing students after undergrad level directly into a PhD program.
Especially, if the student has an opportunity to learn some practical skills in the real world.
Economics is that sort of profession, where many jump using the 3+1 research route.
I mean, what is the point of blindly doing a doctorate when you cannot operate basic IT Systems & Computing Packages that will help you work as an economist at banks, funds, etc
Attending colloquiums, seminars and conferences, co-authoring n publishing papers, etc won't help.
Read 7 tweets

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