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Practical Approaches to Problems in the Financial Industry

w/ Mario Morales @ PyGotham 2014 - GitHub at: https://github.com/risk
by

Andy Fundinger

on 21 August 2014

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Transcript of Practical Approaches to Problems in the Financial Industry

End Goal
A personal risk management platform

Shows risk for each invested mutual fund
Supports/allows for reallocation
First Steps
Measuring Risk
Practical Approaches to Problems in the Financial Industry
Thank you!

Andy Fundinger
Andy.Fundinger@riskfocus.com

Mario Morales
Mario@tatt.io
Andy Fundinger
Andy.Fundinger@riskfocus.com

Mario Morales
Mario@tatt.io


In operation
This is the sort of thing that's easy to find the math for but trickier to actually do
Getting Data
Market
Calculating Prices
Pricing Funds and Portfolios
Disclaimer
Risk Management Systems are tools
efficiently designed and managed at
financial institutions implemented in the
world financial system.

This presentation is just a simplified view to show a practical example with the use of Python.
financial systems generally require:
holdings data
market data
computation methodologies
For a risk system we
are computing risk
Two Approaches
Simulation based on daily returns
Historic Simulation Approach
Accessing Funds
Daily returns
Historical Simulation
We can also get the market by simply using past markets
This has less assumptions and is easier to explain
This approach is required by certain regulations, especially to analyze risk in abnormal markets
Calculating Historical Var

computing value at risk means finding the value of a portfolio such that there is a specified probability that the portfolio will be worth at least this much over a given horizon.

References:
-F.A.Q in Quantitative Finance
P. Wilmott
- olafSmits github repo, ch 9
MCMFinance
Simulation based on daily returns
What's missing?
Validation/Approval
Distributed computing
Complex pricers
Metrics other than Var
handling for new assets
(< 1yr history)
Definitions
Asset - something of value, a stock, currency, option, etc.
Holding - a quantity of an asset
Fund - a collection of holdings, like a mutual fund
Portfolio - a group of fund investments i.e. everything you own.
https://github.com/riskfocus/Pygotham2014
http://prezi.com/h2gr6mpcwbj1/practical-approaches-to-problems-in-the-financial-industry/
https://github.com/riskfocus/Pygotham2014
http://prezi.com/h2gr6mpcwbj1/practical-approaches-to-problems-in-the-financial-industry/
Full transcript