Bliss English Club

Hi, Blissers,

Attendees: Miller (Host), Winnie, Joe, Ellen and Laura (New comer)

Meeting photo link: https://photos.app.goo.gl/mmCIjF80vT0ibEae2

Here’s the quick recap and we enclosed the PDF file of his meeting materials. Shall you have any question , please feel free to raise it up and discuss with us when you join our future Bliss meeting 😊

After a quick self-introduction, Miller starting his meeting by introduces different types of risk while doing investment and he emphasized that doing risk management is the same thing as doing investment management (while some people may think they are 2 different things).

1.      Types of Risk :

O   Market Risk: Loss caused by price decline in our asset

O   Credit Risk: Loss caused by counterparty default in interest or principle payment ( e.g. Bond and Loan )

O   Liquidity Risk:

    (1) Loss caused by us liquid the asset in bad price

    (2) Loss caused by extra funding cost when we don’t have

    Enough money to finish settlement

O   Operational Risk: Loss caused by operational missing like

  Fat-finger, Hacker attack…etc.

O Legal risk: Loss caused by violate the law governance like

  KYC is exercise not solid, money laundering.

2.      How to identify the risk :

You need to know the essence of the investment/trade

Including: Purpose/Target of this trade,

         Structure of this deal,

         The current market,

         The future market forecast,

         Counterparty’s credit

3.      Risk measurement tools :

Miller then introduce different risk measurement tools for different types of risks, it’s quite technical and need some mathematic formula to accomplish , but under Miller’s explanation , we all got a preliminary understanding of those tools . For details, you may refer to enclosed PDF file.

4.      Case Study (2007 Crisis):

This is the most interesting part of meeting , while Miller introduced the famous cases happening during the 2007 economic crisis with above mentioned different types of risks of investment and shared with us the lesson learned and solutions for how to prevent the same case happening on the investment  .

What impressed us most is about the subprime mortgage loan credit crisis, we not only understand the whole story about this famous event, and also surprised to understand that how investment banks can pack “lots of garbage grade financial products into a tasty cake” (please refer to PDF file p39-p41), and why those garbage can be repacked to tasty cakes for investors? The answers lie in via diversifying their pool of mortgage loans, and also support by the US government. This case really taught us a lesson that not only in our life, but also in investment, we really need to invest with cautions while the position looks “too good to be true “and never play unless we knowing what we’re playing.

5.      Case Study (Our own)

In the end , we discussed our failure experience on investment , and Miller also summarized and reminded us of the risk management as following 4 conclusion , and emphasized that the key to survive is to control our liquidity risk while doing the investment .

Market risk: high frequency

Credit risk: High loss amount

Operation risk: high frequency

Liquidity risk: Key of survive

Reflections:

We had a very informative meeting hosted by Miller, a risk management and control manager in the financing field more than 10 years. It definitely brings us some new ideas of investment risk management and also, it helps us a lot to review our curren and future investment after attending Miller’s meeting. In all,

we all thank Miller with his dedication and resourceful meeting with us in such rain pouring day …!! Let’s hope to have his Serial 2 meeting on investment and related subject soon in 2018 😊

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