Dollar Index Investing

Risk Management Policies In Financial Services: Hedge Funds

Many financial services make use of a well-structured risk management policy to manage their day-to-day exposure to risk, including exclusive investment entities such as hedge funds. For many years hedge funds were considered the high-stakes bad boys of the investing world; an image that the industry despised and rejected in the public eye, yet celebrated behind the closed doors of their high-rise offices and their swanky exclusive nightclubs. Over the past 36 months the hedge fund community has stepped up their efforts to shed the negativity and weariness that is often associated with them. Of course in some ways this “risky market gambler” perception was always unfounded, especially considering hedge funds use complex strategies and investment vehicles to hedge away systemic and market risk.Due to their size and unique capital structure, hedge funds were previously allowed to operate outside the stringent oversight of investment regulators, but this has changed over the past decade. While hedge funds continue to abstain from using the comprehensive risk management ‘best-practices’ of other financial services such as banks and large fund managers, they have certainly increased their use of risk management policies. These processes have evolved to monitor not only how their range of investments mitigate inherent market risk for their investors, but also how they conduct their business in general.The organizational risk philosophy at any particular hedge fund typically reflects the interest-level and commitment of that fund’s top traders and officials. The greater these managers believe in not chasing greater return at the expense of risk compliance, the stronger the fund’s risk policy is embedded throughout the entire fund’s other personnel. Many hedge funds now employ a Chief Risk Officer and have doubled their expenditures on risk management processes and risk compliance. They are increasingly seeking individuals who have obtained at least one risk management certification, focusing on credit and financial risk. These changes are the result of not only clearer minds within the hedge fund management community, but also from changing investor expectations. While hedge fund have always used complex quantitative risk management models to quell investor fears, most managers will tell you that in the past few investors know, or cared to know, how they worked. While this sentiment has not dramatically changed during these past few months, there are changing expectations from investors, especially large institutional money managers, in regards to transparency, risk analysis processes, and how business is conducted. Fund managers typically benefit from long investment time-horizons and leeway from their investors, but even traditionally ‘sticky’ investors are demonstrating a willingness to pull assets out of hedge funds if managers do not comply with the changing risk expectations.As a consequence of the 2008 financial upheaval the fund community has witnesses the creation of a series of private oversight groups, such as the ‘Hedge Fund Standards Board’. These self-regulatory bodies are creating industry benchmarks and best-practices in risk management, and from which the community can develop their own risk policies.Hedge funds of all sizes have developed and incorporated risk management policies into their operational and trading strategies. These processes include limits on acceptable losses per trader, controls and limits on the types of investments made, and formal communication and internal policing procedures. These funds offer limited transparency on how they conduct business to anyone outside their inner circle of investors, and thus individual firms are expected to internally police themselves. An predominant precursor of risk in this business is the overuse of leverage, and risk management in this area has become a hot-button issue within the fund community. Many fund managers use borrowed money (funds borrowed against the assets provided by their investors) to maximize the return on their positions, and achieve the above-market gains the industry is famous for. However, this practice leaves the firm and its investors assets exposed to unforeseen market risks. The majority of funds now have risk assessment policies in place that monitor their liabilities-to-assets ratios and prevent individual traders from exceeding leverage limits.Due diligence in many aspects of the hedge fund business has increased since the 2008 financial crisis. Fund managers are now acutely mindful of their brokerage trading connections, as well as the structure of asset-custody with transaction partners. Since the 2008 financial crisis hedge funds have learned the hard way that counter-party risks certainly do exist in the financial services sector, and the domino effect resulting from the collapse of Lehman Brothers demonstrated that even the best and brightest can be left exposed.

Statistics Programming – Easing the Pain

Different sets of software are being developed everyday just to ease man with some of his technical works such as in the field of business. These programs are specially designed to make high speed calculations and analysis of the data and come up with a soft copy of information output that can be used instantaneously after the software processes it. Statistics is one of the most complicated clerical works of anyone who is studying or working in the field of economics, politics and even social matters. Statistics is deemed to be of importance because it gives a type of descriptive conclusion or interpretation that can be very precise depending upon the quality of data that has been gathered and the competence that is given to organize, interpret and represent that data. But even with the level of competence that a person has with regards to his statistical skills, there is still a probability that a miscalculation might be made and alter the holistic outcome of the statistics.

However, because of the rapid advancements of technology and the evolution of the functions that can be performed by the humble computer software developers has come up with a certain software program that can make ease any statistician of all their statistical tasks. The development of a program that is able to perform the task of organizing and interpreting statistical data was q revolutionary breakthrough when it comes to statistical analysis help. Statistics programming is defined as the systematic calculation of all the numerical data that has been downloaded into the system wherein it is organized basing upon the categories. These categories are classified upon the nature of the data that has been downloaded. After the process of organizing the data, it will be then interpreted numerically. This function of statistical programming helps to lessen the burden of work and also to maximize the output of a statistician.

Statistical program is composed of sets of languages. There are a total of 17 categories in a statistical program and these are the following;
• Analytica, ADMB
• Gretl, GAUSS
• Mathematica
• OxMetrics
• Quantum (Programming Language)
• Programming Language, SPSS, Symbolic Data Analysis, Sysquake, SAS (software and language), Speakeasy(Computation), SHAZAM (Software)
• World Programming System
• XLispStat

Each of these categories of Statistics Programs has their own unique sets of functions. Each one of it is capable of performing specific functions about statistics. The MATRIX LAB is one of the statistics programs that are widely used today. It is a program that is provided by a certain company that is said to be fully capable of solving ad coming up with solutions with regards to any mathematical or numerical problems that are fed into it. The MATLAB assignment helps not only statistics but also other aspects that majorly require the use of mathematical equations and solving. Because of these software programs, statisticians are given more time to pay attention to other details of the data and leave the organization and the interpretation of it to the statistics software.