RiskLab and Center of Competence Finance in Zurich

invite you to attend the

Risk Day 2009

Mini-Conference on Risk Management in Finance and Insurance

Time: Friday, September 11, 2009,10.00-18.00

Location:ETH Zürich, Main Building, Room HG F-5,
Rämistrasse 101, 8092 Zürich.

Organizer: Prof. Dr. Walter Farkas

Registration: The Risk Day 2009 is free of charge but due to administrative reasons you are kindly requested to register electronically following the

registration link.


10.00–10.30 Welcome Coffee
10.30–10.35 Prof. Dr. Martin Schweizer (Department of Mathematics, ETH Zürich):

10.35–11.25 Prof. Dr. Josef Teichmann (Department of Mathematics, ETH Zürich):
A new approach to scenario generation for risk management

Abstract: We describe a new approach to scenario generation in risk management which combines the advantages of historical and distributional approaches. The approach is based on underlying stochastic differential equations. It allows for an easy calibration to the given time series and is flexible towards the inclusion of events, business time versus trading time, etc. Several implementations are presented.
11.30–12.00 Max Fehr (Institute for Operational Research, Department of Mathematics, ETH Zürich):
Design of allocation mechanisms for cap and trade schemes

Abstract: Recent price development of carbon allowances in the EU ETS and it's impact on European electricity prices exhibits the importance of a clear understanding of such Trading Systems. We propose a stochastic equilibrium model for the price formation of allowances and products, whose production causes pollution. It turns out that for any cap and trade scheme, designed in the spirit of the EU ETS, the consumers' burden exceeds by far the overall reduction costs, giving rise for significant extra profits (windfall profits) for power producers. Following this insight we show to adapt allocation mechanisms to reduce windfall profits.
12.00–14.00 Lunch Break
14.00–14.30 Simon Cooper (Partner, Oliver Wyman):
Liquidity risk - lessons learned in the crisis

Abstract: The recent crisis has shown that the banks' focus on capital over past years has left many institutions unprepared for the dramatic changes of liquidity in key markets they were dealing in. The presentation will review the drivers of liquidity and trading activity, and explore the new techniques that banks develop to protect their liquidity position.
14.30–15.00 Dr. Mario Wüthrich (Department of Mathematics, ETH Zürich):
Cost-of-capital approach in non-life Insurance

Abstract: Under new solvency regulation non-life insurance companies need to calculate a market-value margin for the runoff of their liabilities. We use the cost-of-capital approach for the calculation of this market- value margin. This involves multiperiod risk measures. Because multiperiod risk measures are often too difficult, several proxies are used in practice.We compare these proxies with the mathematically rigorous multiperiodversion within the chain ladder claims reserving model.
15.00–15.30 Coffee Break
15.30–16.00 Dr. Andreas Kull (Chief Risk Officer, AXA-Winterthur):
A simple proxy for the market value of insurance liabilities

Abstract: We present a simple valuation method for insurance liabilities in the context of market consistent valuation. Based on an information theoretical argument and a non-arbitrage assumption, the method provides a proxy for the value of insurance liabilities in deep and liquid markets. Results are briefly discussed with a view towards the ongoing debate of valuation frameworks for IFRS Phase 2 and Solvency II.
16.00–16.30 Dr. Pieter Klaassen (Head of Firm-Wide Risk Aggregation, UBS):
The future of economic capital after the sub-prime crisis

Abstract: Economic capital has been adopted by many financial institutions in the last decade as a comprehensive risk measure to assess internal capital requirements and form the basis of risk-adjusted performance management. Also regulatory capital requirements have increasingly been based on economic capital concepts. In the sub-prime crisis, however, many people have started to doubt the value of economic capital models because they did not "predict" the losses that occurred. In this presentation we outline reasons for the failure of economic capital models during the sub-prime crisis, and translate these into a number of lessons for the successful use of economic capital in the future.
  • Special Guest:
    Torsten de Santos, CEO, LGT Capital Management
    From the UNI/ETH Zuerich joint degree Masters program to the financial services industry
  • Graduation Ceremony for the sixth cycle (2007/2009) of the joint degree program Master of Advanced Studies in Finance of the University of Zurich and of ETH Zurich
17.00–18.00 Cocktail

The speakers: (in alphabetical order)

  • Simon Cooper is a partner in Oliver Wyman's European Finance & Risk practice, and leads an initiative in liquidity risk management.
  • Max Fehr is researcher at the Department of Mathematics of ETH Zurich.
  • Dr. Pieter Klaassen is Managing Director and Head of Firm-Wide Risk Aggregation at UBS AG. Before joining UBS, he worked at ABN AMRO N.V. as Head of Enterprise Risk Modelling, and at Rabobank International as Head of Exotic Options. He also held a part-time appointment at Vrije Universiteit in Amsterdam, and has (co-)authored various articles on asset-liability management, option valuation, and credit risk modeling. He has a Ph.D. degree in Operations Research from the MIT Sloan School of Management, and a Master's degree in Econometrics from Erasmus University. He is co-author of the book: "Economic Capital: How it works, and what every manager needs to know".
  • Dr. Andreas Kull is CRO at AXA Winterthur. Prior to joining AXA Winterthur, Andreas was an executive director at Ernst & Young's Global Financial Services Risk Management practice and had various actuarial and risk management positions at Converium (now Scor) and Zurich Financial Services. He is a fully qualified actuary (SAV, DAV) and has a Ph.D. in Physics from Ludwig-Maximilans-University of Munich and a Master's degree in Physics from University of Bern.
  • Torsten de Santos is CEO of LGT Capital Management.
  • Prof. Dr. Josef Teichmann is since June 2009 Professor for Financial Mathematics at the Department of Mathematics at ETH Zurich.
  • Dr. Mario Wüthrich is senior researcher at the Department of Mathematics of ETH Zurich.

Conference Secretary:

Ms. Galit Shoham, HG G21.3 (IFOR), Phone 044/632 40 16, E-mail: sekretariat@ifor.math.ethz.ch

Previous Risk Days:

2008, 2007, 2006, 2005, 2004, 2003, 2002, 2001, 2000, 1999, 1998.

Please send comments and suggestions to Walter Farkas.
Last update:  August 21, 2009