What do mathematicians do in Financial Risk Management and how different is it from actuarial work?
Financial Risk Management:
Financial risk management principally involved in managing the risk in financial transactions. Financial risk management enables the risk analyst to explore and investigate the associated risk in the investment portfolio.
Answer and Explanation:
Mathematicians play a vital role in managing financial risk, financial risk management involves various quantitative tools for analyzing the risk of a portfolio. These quantitative tools include mathematical calculation which can be easily operated and understand by the mathematicians. Mathematical terms like probability, statistics models, time calculation, determination are involved in financial risk management. Mathematician uses their numerical knowledge in analyzing the risk.
An actuarial is responsible for designing insurance as well as pension plans, they primarily work for the only insurance sector. Actuarial measures the cost of property damage, accident cost, and injury of a person for determining the claims on financial losses. An actuarial must have good knowledge of business and finance, which is not required for a mathematician. A mathematician in financial risk management is only responsible for hedging and using quantitative tools to minimize risk, but an actuarial work along with risk analysis required other tasks like asset valuation for loss, accident site visiting and situation analyzing.
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Learn more about this topic:
from Finance 305: Risk ManagementChapter 1 / Lesson 4