Hedging: Banks Require Enterprise Wide Risk Assessment.(RiskMetrics Group)(Brief Article)

Stock market volatility and unexpected interest rate movements have caught the attention of investors this year. And that may be good news for the people at RiskMetrics.

The firm, an offshoot of J.P. Morgan that was spun off in 1994, now provides risk management analytics and services to 500 firms, including 250 banks. The software is designed primarily to help those firms assess their "value at risk" across the entire enterprise, which typically consists of many different assets, including equity and fixed-income positions.

And mortgage securities are a part of that mix for many clients. In fact, Peter Bernard, executive director of RiskMetrics, said the company has found some shortcuts that should help firms evaluate the complicated risks associated with their mortgage holdings more quickly.

"We are on the eve of introducing a specialized module for managers of mortgage-backed securities," Mr. Bernard said.

The company's core RiskMetrics product helps management, shareholders, portfolio managers and regulators understand portfolio risk, he said, by making "value at risk" calculations. Financial institutions are often required to frequently measure VaR by banking regulators.

As an example, a bank might calculate that it ...