Real time is seen by many as the holy grail of risk management. With regulators putting increasing demands on banks to provide real time data and with the cost of collateral rising, the pressure is on to understand risk in a more timely manner.
On September 15 Kweku Adoboli, a 31 year old Delta One
trader at UBS broke the news to his bosses that he had lost
billions of dollars through unauthorised trading of ETFs. The
news would send shock waves throughout the financial system and
plunge a bank that was just emerging from the crisis back into
What is perhaps most shocking about the loss is the fact
that Adoboli not only apparently circumvented internal
individual trader position limits, he also managed to build up
a position that was not flagged for exposing the banks to such
an enormous loss, allegedly due to fictitious hedges.
The incident highlights the challenges banks face in
monitoring the risks taken by their trading operations. At the
time of writing, details of the rogue trades were still unclear
but in a world where billions of dollars can be made or lost in
the blink of an eye, real time risk management is no longer a
luxury but now a necessity. It is a challenge that is forcing
an overhaul of how banks organise their risk systems and
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