Risk Management Question

[sak]

This is a general question especially for Prof. @Ken Abbott.

On a prop desk, how is the risk management done for doomsday scenario. E.g. do people consider cases like NYC being hit by another terrorist attack like they have in movies, etc. How do you manage that ?

Regards

 

[Ken Abbott]

You can't really "manage" to a disaster scenario. All you can do is have contingency plans. You could buy options, of course, but that will be very expensive.

Firms usually run extensive stress tests and scenarios to estimate possible losses and develop plans.

 

[sak]

You can't really "manage" to a disaster scenario. All you can do is have contingency plans. You could buy options, of course, but that will be very expensive.

Firms usually run extensive stress tests and scenarios to estimate possible losses and develop plans.

Thanks.