Risk Management in Credit Intermediaries and Investment Banks

Abstract

All companies need to undertake risk management in order to minimise the possibility of unexpected events having catastrophic outcomes. Banks and investment banks are in the business of dealing in risk – it is their ‘stock-in-trade’ – through their activities in securities and derivatives markets. If they are to be able to provide risk management services to clients they need to manage their own risks in order to ensure that they stay in business. Also, banks are much more highly leveraged than any other type of company and thus a relatively small fall in the value of their assets can easily wipe out their capital.