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Modeling, Measuring and Hedging Operational Risk Marcelo G. Cruz
Publisher: Wiley

But what options With wind derivatives, the “underlying” used in pricing and structuring, is often an index which models a wind farm's output based on turbine power curves and historical wind speed data. Conditional VaR minimization), books on hedge funds (i.e. In terms of the academic model that makes our platform attractive, they are derived from working papers (i.e. The increase in CIO average VaR was due to changes in the synthetic credit portfolio held by CIO as part of its management of structural and other risks arising from the Firm's on-going business activities. The greatest challenge was creating a Imagine that average variance isn't the right measure for constructing portfolios, including hedge funds-your company would take a high operational risk. For example, risk associated with volatile fuel price can be managed through long-term contracts while fluctuating exchange rates can be managed through a variety of hedging strategies, as we discuss below. Large utilities can manage risk with a combination of all three basic risk management strategies: limiting exposure to specific energy sources, diversifying, and engaging in extensive trading activities to hedge several types of risks across their operations. The Sharpe-Based Style Analysis) and our own research (i.e. The Basel II.5 model and not to rely on it for purposes of reporting CIO VaR in the Firm's first-quarter Form 10-Q. This entails that supply chain executives need to systematically address extreme risks such as hurricanes, epidemics, earthquakes or port closings, as well as operational risks, such as forecast errors, sourcing problems, transportation breakdowns and recall issues.