Moving to the methodology of how risk is calculated, Mr. Jaiswal told the students about the concept of VAR (Value at Risk) which is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. He also told the students about a common risk parameter in banking institutions called Loss Given Default or LGD which is the share of an asset that is lost if a borrower defaults. These in turn define the level of uncertainty that is attached to an instrument like a loan or a fund.
On being asked how one can analyse the risks in situations that have not been experienced before, he briefed the students about the Monte Carlo Simulation. It is an interesting algorithm that uses repeated random sampling techniques to obtain numerical results to solve problems. His invaluable insights were much appreciated by the batch where many aspire to someday build their careers in financial markets, consulting and analytics, thus following the footsteps of the much accomplished Mr Rajeev Jaiswal himself. The session ended with a bevy of questions mostly concentrated in the financial markets and data analytics area.
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