Risk Management Analysis Of J.p

1997 Words8 Pages
Risk Management Analysis of J.P. Morgan Private Bank
FIN6383-Final Case Study
Shiyang Wang
Introduction
J.P. Morgan Private Bank was one of the most successful banking services globally. It offered high-end financial products and services with professional risk management team. In financial crisis, the Private Bank successfully survived with relatively great performance. This paper would exposit the key to their success of risk management by answering six questions.

1. How successful Morgan’s Private Bank was in managing its risks during 2008-2009? Why?
During the volatile and instable period, the risk was obviously brought to a new level. Morgan’s Private Bank kept their eyes open all the time. I concluded two main aspects.
Firstly,
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Then in late 2008, their discussion was to reduce the risk to the lowest level. 30% of the portfolios were cash and only 25% was invested in equities. Under Embedded risk management, investment team and risk team could update their views quickly and made efficient decisions.
Secondly, the balance between using Model and exercising judgment was conductive to risk management. Before crisis, Medigan and Zhikharev did not believe VAR was good enough to measure risks and only worked for normal distributed assets. They came up with a new tool called Global Access Risk Factor Model. The new risk tool enhanced the judgment and helped make some wise decisions in managing risk. The model helped to keep everyone honest. In the summer 2008, the Model performed as expected. It made sure the portfolios were adjusted accordingly with their views of macro environment. In March 2009, the Model suggested to add more risk in order to get higher return. However, the Global Access team still believed the market was not going to recover yet. They did not count on the Model and decided to take cautious steps. On one side, they had downside-protected trades by limit premium and quickly took gain and cut loos. On the other side, they carefully chose trades with strong fundamental value. For the year 2009, they portfolios behaved significantly well.
Other than the two
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