Riskmetrics and Creditmetrics

• Riskmetrics provides a comprehensive methodology for assessing the risk of complex portfolios. The Riskmetrics document motivates the methodology, discusses alternatives, provides historical perspective, and explains how estimation of model parameters (e.g. means, volatilities and correlations) for currency, FX, and other assets) is performed. Here are the component pieces of this document:
• Part I: an overview, discussing different approaches to risk-management, and motivating the rest of the document. Chapter 1 is very nicely written, and chapter 2 does an excellent job of putting the methodology in perspective. For us, this is the most important section of the document.
• Part II: statistical issues, including the normality assumption and the use of monte carlo simulation
• Part III: methodology, the concept of "mapping" (in which different aspects of risk in a position are assigned to different "risk buckets"), and a discussion of Monte Carlo. This is the second-most important section of the document.
• Part IV: data, including measurement issues (for example, what do you do about weekends and holidays), and data sources. This is not important for us but feel free to splurge!
• Part V: Performance assessment
• Credit Risk Both JP Morgan and Credit Suisse have published approaches to evaluating credit risk. You can check out the following:
• Credit Suisse ("CreditRisk+") is here. You will need to register to see the document - I do not feel I can post it for that reason.
• "CreditMetrics" is an offshoot of Riskmetrics. The organization is similar to that of RiskMetrics.