Risk ALM USA 2005: Panel discusses differing approaches to ALM

Leonard Matz, a managing director at Kamakura Corporation – a Hawaii-based risk technology vendor – has cautioned against misuse of VAR. “I believe it’s a huge mistake to apply VAR to look at the funding [side] of the balance sheet,” said Matz who was speaking during a panel discussion on the second day of Risk Magazine’s ALM USA 2005 conference in New York last Friday.

Matz said that irrespective of whether or not a fat-tailed VAR-type approach is used, models do not typically include contingency risk, or economic shocks. Panel members expressed mixed views on the value and use of VAR; George Collins, Director of Market Risk Management at the Federal Home Loan Bank of Boston said his firm uses VAR as a primary tool rather than other more highly- quantitative risk models, for reasons of ease-of-use.

Panelists and audience members alike had varied experiences of