A Primer on Risk Management: Applications to Latin America and the Caribbean
By Jesse Wright (12/97, IFM-106-97, En) See also Infrastructure and Financial Markets
Risk management is a work in progress. In just the last decade, the field has evolved from simple notions of risk to sophisticated mathematical and statistical models to measure risk. The "derivatives debacles" of the recent past increased the urgency of finding ways to control risk and had the salutary effect of making regulators and bank and corporate managers recognize their responsibilities to control these activities. Risk management units within banks and corporations use elaborate Value-at-Risk models, but only as a guide to management judgment and common sense. Many lessons have been learned in the last few years, and the field continues to evolve rapidly. This paper seeks to give the nonspecialist a sense of why risk management is so important in modern finance, how the area has evolved and what important obstacles have still to be overcome. Issues covered in this paper include the laws and regulations affecting derivatives markets, disclosure policies, counterparty relationships, risk measurement and capital adequacy, and risk management practices in Latin America and the Caribbean.
Last updated: 05/08/07
