What is RiskMetrics?
RiskMetrics Group LLC is a company specialising in providing risk management tools that allow financial institutions to measure their market risk in real time. The product became an industry standard in the early 2000s, but its reliance on Value-at-Risk (VaR) modelling came under scrutiny following the 2008 financial crisis.
Where have you heard about RiskMetrics?
As a private investor, you may not have heard of RiskMetrics as its products are aimed at financial institutions such as investment banks and hedge funds. However, some commentators maintain that the over-reliance on RiskMetrics’ VaR modelling by these institutions was a major factor in the financial crisis of 2008.
What you need to know about RiskMetrics.
RiskMetrics was originally a part of JPMorgan in the early 1990s and focused on measuring the bank’s market risk across asset classes. The ground-breaking work of their quantitative analysts and developers came to the attention of the bank’s clients who began to request the model for their own use. The JPMorgan span RiskMetrics out as a separate company in 1994 and it was purchased by MSCI Inc in 2010. Competitors include RiskLab and SunGuard. Regardless of the controversy surrounding the use of VaR modelling, the firm’s risk management products remain widely used within financial institutions today.