Risk Finance and Asset Pricing: Value, Measurements, and Markets
Over the past two decades, financial firms, companies, and governments have shifted greater attention to financial manipulations in which they capitalized on leverage and short-term returns. These actually resulted in an explosive and global growth in financial activity. A financial Pandora's box had been opened, and countries and blue chip corporations believing in perpetual growth and once thought too big to fail, found themselves strangled with a debt they were not able to bear.The recent market melt-down and credit liquidity crisis created full realization that complex financial products—when misunderstood and misused—can have devastating effects. Risk Finance and Asset Pricing: Value, Measurements, and Markets is a comprehensive introduction to financial engineering that presents the foundations of asset pricing and risk management, while stressing real-world applications.Written for both beginning and practicing financial engineers, author Charles Tapiero—the Topfer Distinguished Professor of Financial Engineering and Technology Management at the NYU Polytechnic Institute—provides:A non-quantitative introduction to the business of finance, risk, and their many applicationsAn overview of the statistical approaches for measuring riskAn introduction to the concept of utility and financial risk managementAn outline of the Arrow-Debreu framework in discrete states and time for assets and derivatives (options) pricingAn outline of credit risk, scoring, and complex structured financial products such as credit derivatives, their models, their demystification, pricing, and finally, a cursory view of technical approaches to implied pricingEach chapter includes a summary of the techniques described, and concludes with a series of problems so readers can test what they've learned.Financial engineering, despite its challenges and opportunities, when misunderstood, has the potential to wreak havoc on world economies and individual portfolios. Risk Finance and Asset Pricing presents a new direction in financial engineering education that combines reality and theory so that risk finance might again work as intended.