A top risk management practitioner addresses the essential aspects of modern financial risk management. In the "Second Edition of Financial Risk Management + Website", market risk expert Steve Allen offers an insider's view of this discipline and covers the strategies, principles, and measurement techniques necessary to manage and measure financial risk. Fully revised to reflect today's dynamic environment and the lessons to be learned from the 2008 global financial crisis, this reliable resource provides a comprehensive overview of the entire field of risk management. Allen explores real-world issues such as proper mark-to-market valuation of trading positions and determination of needed reserves against valuation uncertainty, the structuring of limits to control risk taking, and a review of mathematical models and how they can contribute to risk control. Along the way, he shares valuable lessons that will help to develop an intuitive feel for market risk measurement and reporting. It presents key insights on how risks can be isolated, quantified, and managed from a top risk management practitioner. It offers up-to-date examples of managing market and credit risk. It provides an overview and comparison of the various derivative instruments and their use in risk hedging. It offers a companion website that contains supplementary materials that allow you to continue to learn in a hands-on fashion long after closing the book. Focusing on the management of those risks that can be successfully quantified, the "Second Edition of Financial Risk Management + Website" is the definitive source for managing market and credit risk.
Foreword Preface Acknowledgments Chapter 1: Introduction 1.1 Lessons from a Crisis 1.2 Financial Risk and Actuarial Risk 1.3 Simulation and Subjective Judgment Chapter 2: Institutional Background 2.1 Moral Hazard???Insiders and Outsiders 2.2 Ponzi Schemes 2.3 Adverse Selection 2.4 The Winner?s Curse 2.5 Market Making versus Position Taking Chapter 3: Operational Risk 3.1 Operations Risk 3.2 Legal Risk 3.3 Reputational Risk 3.4 Accounting Risk 3.5 Funding Liquidity Risk 3.6 Enterprise Risk 3.7 The Identification of Risks 3.8 Operational Risk Capital Chapter 4: Financial Disasters 4.1 Disasters Due to Misleading Reporting 4.2 Disasters Due to Large Market Moves 4.3 Disasters Due to the Conduct of Customer Business Chapter 5: The Systemic Disaster of 2007-2008 5.1 Overview 5.2 The Crisis in CDOs of Subprime Mortgages 5.3 The Spread of the Crisis 5.4 Lessons from the Crisis for Risk Managers 5.5 Lessons from the Crisis for Regulators 5.6 Broader Lessons from the Crisis Chapter 6: Managing Financial Risk 6.1 Risk Measurement 6.2 Risk Control Chapter 7: VaR and Stress Testing 7.1 VaR Methodology 7.2 Stress Testing 7.3 Uses of Overall Measures of Firm Position Risk Chapter 8: Model Risk 8.1 How Important is Model Risk? 8.2 Model Risk Evaluation and Control 8.3 Liquid Instruments 8.4 Illiquid Instruments 8.5 Trading Models Chapter 9: Managing Spot Risk 9.1 Overview 9.2 Foreign Exchange Spot Risk 9.3 Equity Spot Risk 9.4 Physical Commodities Spot Risk Chapter 10: Managing Forward Risk 10.1 Instruments 10.2 Mathematical Models of Forward Risks 10.3 Factors Impacting Borrowing Costs 10.4 Risk-Management Reporting and Limits for Forward Risk Chapter 11: Managing Vanilla Options Risk 11.1 Overview of Options Risk Management 11.2 The Path Dependence of Dynamic Hedging 11.3 A Simulation of Dynamic Hedging 11.4 Risk Reporting and Limits 11.5 Delta Hedging 11.6 Building a Volatility Surface 11.7 Summary Chapter 12: Managing Exotic Options Risk 12.1 Single-Payout Options 12.2 Time-Dependent Options 12.3 Path-Dependent Options 12.4 Correlation-Dependent Options 12.5 Correlation-Dependent Interest Rate Options Chapter 13: Credit Risk 13.1 Short-Term Exposure to Changes in Market Prices 13.2 Modeling Single-name Credit Risk 13.3 Portfolio Credit Risk Chapter 14: Counterparty Credit Risk 14.1 Overview 14.2 Exchange-traded Derivatives 14.3 Over-the-counter Derivatives Bibliography About the Companion Website Index
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