The Role of Financial Engineering in Stock Risk, An Analytical Study for Trade Bank of Iraq

Abstract

Through financial engineering and its methods and tools, risks can be controlled and accurately identified and we are able to monitor important changes in the risk situation. Financial engineering can give us a comprehensive idea of how to hedge the risks to which commercial banks or financial institutions in general may be exposed and prevent losses from occurring. Ensuring that banks and financial institutions obtain an appropriate return as a result of the risks they may face. The research aims to determine the type of risks facing the Trade Bank of Iraq (research sample) and attempt to address them using a simulation method, and to determine the extent to which the Monte Carlo simulation technique can be applied in financial engineering related to risk management in the Trade Bank of Iraq. The research hypothesis is that it is possible to rely on quantitative methods used in financial engineering to build and engineer a model to measure risks in commercial banks based on a Monte Carlo simulation model related to the guiding principles of risk management in commercial banks. The model has proven its predictive ability through its success in screening tests for the purpose of examining the model and proving its ability to simulate.