House Subcommittee

WASHINGTON -- A House sub-committee plans to hold a hearing next week to delve into how derivatives products are structured, valued, and evaluated under firms' risk management systems.

The hearing is to be held on Wednesday by the Energy and Commerce Committee's telecommunications and finance subcommittee.

Rep. Edward Markey, D-Mass., the subcommittee's chairman, announced the hearing yesterday and said it would also examine "what assumptions and uncertainties are associated with the process of modeling derivatives-related risks and what are the most likely future sources of derivatives-related financial losses.

"We need to learn more about how the process of valuing and modeling derivatives-related risks works, what role 'stress testing' and simulations play in helping dealers and end-users to monitor and control risks, and what steps regulators should be taking to protect the public interest," Markey said.

Three witnesses are scheduled to testify at the hearing. They are: Peter Vinella, a senior consultant to Smith Barney Inc.; Tanya Beder, a principal at Capital Market Risk Advisors, a consulting firm that helps firms set up risk management systems for derivatives; and Camillo Gomez, a former Lehman Brothers employee who is now at Los Alamos Laboratory in New Mexico.

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