Risk quanta: an approach to understanding modern financial risk
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 11 May 2015
Abstract
Purpose
This paper aims to present a recent history of developments and innovations that, along with advances in information technology, have caused fundamental changes in the way that financial risk is created, transformed, transported and extinguished in modern financial intermediation systems. A review and critique of the global supervisory response to these developments is presented.
Design/methodology/approach
A bottom-up approach to the capture, recording, disaggregation, re-composition and measurement of new, standardized, basic elements of risk that the authors refer to as risk quanta is proposed.
Findings
This approach provides a clearer understanding of the financial world that the people live in today and creates a robust information platform to build innovations, advancements and economic growth in the future.
Practical implications
This approach provides decision-makers with a clearer understanding of the financial world that the people live in today and creates a robust information platform to build innovations, advancements and economic growth in the future.
Social implications
This approach provides financial market participants and the public with a clearer understanding of the financial system and creates a robust information platform to build innovations, advancements and economic growth in the future.
Originality/value
This approach is more comprehensive unlike current international proposals for a global financial risk framework.
Keywords
Acknowledgements
The author is grateful to Patricia Kao, Richard Haynes, Jennifer Wine, Justin Rhudy, Con Keating, Tomaso Aste, Kyle Moore, David Eaton, Khaldoun Khashanah, Willi Brammertz and Allan Mendelowitz for their thoughtful comments, input and discussion. The commenters do not necessarily agree with the contents of this paper. The views expressed here do not necessarily represent those of the US Department of the Treasury. Any errors contained in this paper are entirely those of the author.
Citation
Hwang, J.H. (2015), "Risk quanta: an approach to understanding modern financial risk", Journal of Financial Regulation and Compliance, Vol. 23 No. 2, pp. 179-195. https://doi.org/10.1108/JFRC-02-2014-0015
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited