A mathematical guide to measuring and managing financial risk.
Our modern economy depends on financial markets. Yet financial markets continue to grow in size and complexity. As a result, the management of financial risk has never been more important.
Quantitative Financial Risk Management introduces students and risk professionals to financial risk management with an emphasis on financial models and mathematical techniques. Each chapter provides numerous sample problems and end of chapter questions. The book provides clear examples of how these models are used in practice and encourages readers to think about the limits and appropriate use of financial models.
Topics include:
- Value at risk
- Stress testing
- Credit risk
- Liquidity risk
- Factor analysis
- Expected shortfall
- Copulas
- Extreme value theory
- Risk model backtesting
- Bayesian analysis
- . . . and much more
Table of Contents
Preface vii
About the Author ix
1 Overview of Financial Risk Management 1
2 Market Risk: Standard Deviation 15
3 Market Risk: Value at Risk 51
4 Market Risk: Expected Shortfall, and Extreme ValueTheory 73
5 Market Risk: Portfolios and Correlation 91
6 Market Risk: Beyond Correlation 119
7 Market Risk: Risk Attribution 151
8 CreditRisk 167
9 Liquidity Risk 189
10 Bayesian Analysis 205
11 Behavioral Economics and Risk 231
Appendix A Maximum Likelihood Estimation 247
Appendix B Copulas 253
Answers to End-of-Chapter Questions 257
References 295
Index 297
