Seminar Quantitative Financial Risk Management

NGB/LNMB Seminar

On Friday January 14, 2000, the "Nederlands Genootschap voor Besliskunde" (NGB)
and the "Landelijk Netwerk Mathematische Besliskunde" (LNMB)
jointly organize a seminar on Quantitative Financial Risk Management.

In the past 25 years there has been a revolution in the use of quantitative models within the financial world. This has been caused on the one hand by a number of important breakthroughs in academic theory, such as the modern portfolio theory of Markowitz and the option pricing theory of Merton, Black & Scholes. The enormous increase in the possibilities and computing power of computers has, on the other hand, made the widespread implementation and use of these theories feasible in practice. This revolution has put quantitative risk management in an increasingly central place within the financial world. As a consequence, risk management has become the terrain for persons with a solid background in mathematics, decision sciences, probability theory and statistics. During this symposium an overview of important developments in quantitative risk management will be presented, both from actual financial practice and from academia.

NGB/LNMB Exhibition

On Wednesday January 12, 2000,
the "Nederlands Genootschap voor Besliskunde" (NGB)
and the "Landelijk Netwerk Mathematische Besliskunde" (LNMB) jointly organize an exhibition from 12.00 till 19.00.
The following companies will participate: Baltzer (journals), CQM (consultancy), F&H Simulations (consultancy and simulation software), NGB/EURO 2001 (our own conference), Numetrix (supply chain optimization solutions), OM Partners (mathematical programming software), ORTEC (consultancy and software), Paragon (mathematical programming software), SCT (scheduling and supply chain optimization), Sierenberg & De Gans (consultancy and simulation software).

Registration for the seminar is possible in combination with a (partial) registration
for the rest of the conference.
If you only wish to attend the seminar on Friday, then please do not use the registration form,
but contact Lodewijk Kallenberg ()
or click here for registration form in WORD format.

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Program NGB/LNMB Seminar

(Click here for WORD document.)

9:00-9.35 Welcome and introduction
Dr. Pieter Klaassen (ABN AMRO bank / Vrije Universiteit Amsterdam)
9:35-10:20 Quantitative Risk Management at ABN AMRO (preliminary title)
Dr. Jan Sijbrand (ABN AMRO bank)

(Click here for Power Point file of presentation.)
10:20-11:05 Market Risk Measurement: Models, Megastars and Myths
Drs. Theo Kocken (Rabobank)

(Click here for Power Point file of presentation.)
11:05-11:30 Coffee
11:30-12:15 Optimal Portfolios under VaR-Constraints
Prof.dr. Ton Vorst (Erasmus Universiteit Rotterdam)

Recently, financial institutions discovered that portfolios with a limited Value at Risk often showed returns that were close to the VaR and had large losses in the cases where losses exceed VaR. In this paper we consider the construction of portfolios that maximize expected return with a restriction on the Value at Risk. We give both discrete and continuous time results. These theoretically optimal portfolios indeed have the properties as experienced by financial institutions and illustrate that maximizing under a VaR-constraint is very dangerous. We also show that some alternative restrictions will not help and only restrictions on the use of specific instruments in the portfolio might lead to acceptable portfolios.

(Click here for Power Point file of presentation.)
12:15-13:45 Lunch
13:45-14:30 Risk Management and Quantitative Methods
Prof.dr. Arjen Ronner (Philips Electronics & Vrije Universiteit Amsterdam)

At Philips the activities regarding risk management in a broad sense (including insurance) have been centralised and restructured. In the analysis and the structuring of the insurance programs quantitative methods have proven to be essential. The complexity of managing world-wide insurance programs, identifying and measuring risk asks for a great deal of quantitative knowledge and also requires versatile IT systems from all players involved: production units, insurance brokers, insurance companies and damage experts. With the help of a/o. trainees from the Econometrics department at the Vrije Universiteit damage analyses were made for risk management in practice.
In parallel a "holistic" approach to risk management was started up. The influence of e.g. the volatility of exchange rates on the value of the company can only be totally understood if identification and measurement of "exposures" has been organised. When this has been done the risk on group level can be controlled by a "portfolio approach". Yardsticks like "Value-at-Risk" are useful to show that also for an industrial company the risk in a portfolio will be below the sum of the individual risks.

(Click here for Power Point file of presentation.)
14:30-15:15 Limits to Quantitative Risk Management
Prof.dr Jean Frijns (ABP & Vrije Universiteit)

From the perspective of practical use, I shall address the contribution of quantitative risk management in a financial institution specifically in a pension fund. I shall also explicitly emphasise the limitations from a methodological as well as a practical point of view. The continuous thread running through my address will not be the techniques, but the intrinsical structure of the investment process, where quantitative (risk management) methods sometimes play an important role, and sometimes they do not. In any case the following items will be addressed:
Risk management at a top level, directly linked to Asset Liability Management
Risk measurement and risk control in a layered top down investment process
Pittfalls in risk measurement: extreme events, contagion effects, etc.
Credit risk in connection with market risk.
The presentation will be interlarded with practical experiences.

(Click here for Power Point file of presentation.)
15:15-16:00 Tea
16:00-16:45 The Future of Quantitative Risk Management
Prof.dr. Guus Boender (ORTEC & Erasmus Universiteit Rotterdam & Vrije Universiteit Amsterdam)

I will address the empirical benefits and criticisms of quantitative risk management in the financial markets. I will in particular focus on risk management for pension funds, with extensions to insurance companies, banks and individuals.
In the second part of my talk I will attempt to identify success- and failure factors which could explain these benefits and criticisms of quantitative risk management in practice.
In the third part of my address I will take the analysis of quantitative risk management one step further and use the success- and failure factors to give some views about the approach and applications of practical quantitative risk management in the future.

(Click here for Power Point file of presentation.)

After the conference there will be an informal drink at the bar of the conference center.

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