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|Title: ||FINANCIAL RISK AND FINANCIAL RISK MANAGEMENT TECHNOLOGY (RMT): ISSUES AND ADVANCES|
|Authors: ||Bansal, Arun|
Kauffman, Robert J.
Mark, Robert M.
|Issue Date: ||Sep-1991|
|Publisher: ||Stern School of Business, New York University|
|Series/Report no.: ||IS-91-23|
|Abstract: ||Methods for sound risk management are of increasing interest among Wall Street investment banking and
brokerage firms in the aftermath of the October 1987 crash of the stock market. We present an overview of the
basic definitions and issues related to risk, and the management of financial risk and financial risk management
technology (RMT) for information systems (IS) technology professionals. We discuss of the content of risk
management technology, including the models, the software and hardware, and the market data required to track
risk. We also discuss the identification of risky events, alternative approaches to the measurement of risk, and
how investment firms go about formulating strategies to control financial risk.
We next show how changes in the information technologies supporting these tasks have led to improvements in
the control of risk and in the design of products which involve financial risk. Advances in five areas that are
of interest are: communications software, object-oriented programming, the use of parallel processors and
supercomputers, and the application of artificial intelligence and neural nets. Although these new information
technologies create significant opportunities to improve global and departmental risk management, a basic
question that must be addressed involves the costs associated with their implementation. Thus, a third
contribution of this paper is to analyze the extent to which the implementation of these technologies will affect
firm costs. To this end, we evaluate the components of the cost function for risk management, and consider
some ways that the new technologies can be applied to reduce overall costs.|
|Appears in Collections:||IOMS: Information Systems Working Papers|
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