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This approach could be applied with value at risk as the measure of risk or portfolio standard deviation”.(Dowd 1999) “This article explain the use of credit derivatives by corporate treasurers.Financial Corporations have in recent years, become grown with the idea of using traditional derivative products to hedge their exposure. Credit risk, interest rate and on the other side, has to approven a more difficult tame.The inner theme of risk management is that the risk faced by the managers in financial institutions and the methods and markets through in which these risk are managed are becoming gradually more similar whether and financial institutions is acting as noncommercial bank and commercial banks, investment bank, saving bank or loan providing and insurance companies.
(Holmström and Tirole 2000) “This article testing the hypothesis that the banks with additional risky loans and high interest-rate risk disclosure would select loan and deposit rates to attain high interest rate limits. [Accessed 6 September 2019]; Available from: https://
Call Report information relating to banks for 1989–1993 show that the net interest rate limits of commercial banks imitate the default and interest-rate risk. Risk Management in Financial Institutions [Internet].
Theis is based on two important principles, a “Sharpe rule” assess prospective changes in a in fianacial sector and portfolio’s expected risk of return profile and the imporvement of a constant chances of default, that evaluate the financial sector or portfolio’s leverage.
Rules can not be restricted to thel return distributions; they are also collected a variety of abnormal distributions.
BCBS (2006), on risk management processes, require supervisors to be satisfied that the banks and their banking groups have in place a inclusive risk management process.
This would include the Board and senior management to identify, assess, examine and manage or mitigate all material risks and to assess their general capital adequacy in relation to their risk profile.
The process shall take into account appropriate steps to comply with Shari’ah rules and principles and to ensure the adequacy of relevant risk reporting to the supervisory authority “Theory of financial explains that the risk control has become the main concerns of financial institutions.
They require for sufficient arithmetical tools to compute and foresee the amplitude of the probable moves of financial markets is visibly expressed, in exacting for derivative markets., however, classical theories are based on easy assumptions such as Gaussian statistics and lead to a regular dryness of real risks.”(Bouchaud and Potters 2000) “This article guide to take financial risk management decisions.
Moreover, Iqbal and Mirarkhor (2007) explain that the context of risk management in IBs covering the aspect of the needs for risk measurement, management and controls in IBs and highlight the comprehensive risk management framework for each unique risk with the references of IFSB standards.
Greuning and Iqbal (2007) discuss the three major modification of theoretical balance sheet of an Islamic bank that has implications on the overall risk free of the banking environment.