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Title: Measuring and handling risk - How different financial institutions face the same problem

Seminar date: 4^th of June, 2010

Level: Bachelor thesis in Business Administration, Basic level 300, 15 ECTS

Authors: Sarah Rörden and Kristofer Wille

Supervisor: Angelina Sundström

Subject terms: Risk variables, Risk measurement, Risk management, Modern Portfolio Theory, Diversification, Beta

Target group: Everyone who has basic knowledge of financial theories and risk principles but lacks the understanding of how they can be used in risk management.

Purpose: To understand the different Swedish financial institutions’ way of handling and reducing risk in portfolio investing using financial theories.

Theoretical framework: The theoretical framework is based on relevant literature about financial theories and risk management, including critical articles.

Method: A multi-case study has been conducted, built upon empirical data collected through semi-structured interviews at three different financial institutions.

Empiricism: The study is based on interviews with Per Lundqvist, private banker at Carnegie Investment Bank AB; Erik Dagne, head of risk management department and Joachim Spetz, head of asset management at Erik Penser Bankaktiebolag; and David Lindström, asset manager at Strand Kapitalförvaltning AB.

Conclusion: There is a practical implementation of the theoretical models chosen for this research. The numbers the financial models generate do not tell one the entire truth about the total risk, therefore the models are used differently at each study object. For a model to hold it has to be transparent, and take each model’s assumptions into account. It all comes down to interpreting the models in an appropriate way.