The availability of dramatically more powerful computers at ever more affordable prices has allowed institutions to process vast data bases of rates, prices, defaults, and recoveries. As a result, techniques for portfolio management and risk measurement that not long ago were possible only in theory are now becoming integral parts of daily operating practice.
By applying these theories and techniques, institutions today are more effectively pricing and hedging risk, allocating capital, evaluating risk-adjusted returns and identifying the optimum mix of financial products or services. I believe these enhanced management practices have contributed importantly to the economic growth and market gains seen in recent years.