The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.
By Per Hansson, Head of CCR Exposure Management, Deutsche Bank
Why is it important to develop methodologies to review risk on an intraday basis?
Intraday risk monitoring is sound risk management practice for liquid and fast-moving markets. Where reasonably feasible, an institution should monitor its risk appetite limits for breaches during the trading day and not just as of close of business. Sudden spikes in markets can quickly shift exposures away from where they started the trading day and rapidly increase or reduce the value of positions. A pro-active risk management function should be alerted when this happens and then take appropriate action. The action may be to instruct the front-office to reduce positions as volatility go up, or alternatively where possible, find a risk-reducing transaction. From a regulatory standpoint, the expectations these days are that banks have an intra-day risk management strategy and have the capability to monitor and manage risk continuously.