Financial Risk and Financial Risk Management Technology (Rmt) : Issues and Advantages

Methods for sound risk management are of increasing interest among Wall Street investment banking andbrokerage firms in the aftermath of the October 1987 crash of the stock market. As the knowledge of advancedtechnology applications in risk management increases, financial firms are finding innovative ways to use thempractically, in order to insulate themselves. The recent development in models, the software and hardware, andthe market data to track risk are all considered advances in Risk Management Technology (RMT). Theseadvances have affected all three stages of risk management: the identification, the measurement, and theformulation of strategies to control financial risk. This article discusses the advances made in five areas ofRMT: communication software, object-oriented programming, parallel processing, neural nets and artificialintelligence. Systems based on any of these areas may be used to add value to the business of a firm. Abusiness value linkage analysis shows how the utility of advanced systems can be measured to justify their costs