Summary Chapter 1: Financial Risk

CHAPTER 1: FINANCIAL RISK
What do Actuaries/Quants do?
 They are financial professionals who deal with the financial impact of risk
typically with a long term outlook
How do we make financial sense of the future?
 ANALYSE THE PAST: what info. can we gather abt the scenario/ statistics
 MODEL THE FUTURE: project info forward, has anything changed?
 ASSESS AND MITIGATE THE RISKS: what risks affect you/performance?
 COMMUNICATE THE RESULTS: in financial terms to affected party




What you have: possessions What you owe: what a
of the company, e.g. company owes to other
property/ equipment parties, e.g. loans/




SKILLS OF AN ACTUARY:
 financial and mathematical modelling
 a solid understanding of the broader economic and business environment
 analysis and management of uncertainty
 evaluation of financial consequences
 analysis of risk, and risk management
 scientific pricing and reserving techniques (these are relevant to actuaries only, and
refer to managing the products and liabilities of insurance companies)
 asset-liability management
 overall financial management

, RISK:




Characteristic of something that is risky:
o it is uncertain
o outcome has financial consequence
o value attached to it


UNCERTAINTY: