Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk
The world of financial risk management continues to evolve, and in order to keep up with this dynamic discipline, you need the most up-to-date information possible. That's why Steve Allen, a risk expert with over thirty years of experience in this field, has created theSecond Edition of Financial Risk Management.While written to reflect current market conditions—and address lessons learned from the recent financial crisis—this reliable resource still remains true to the first edition's successful approach of making a complex topic understandable. It skillfully covers the strategies, principles, and measurement techniques necessary to effectively manage and measure financial risk. It also explores important real-world issues such as proper mark-to-market valuation of trading positions, the 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.Engaging and informative, this book offers a balanced account of financial risk management. Initial chapters provide a general background to financial risk management, detailing an institutional framework for understanding how risk arises in financial firms and how it is managed. Here, you'll become familiar with key concepts used by today's risk managers and learn from some of the most prominent financial disasters of the past thirty years—including the 2007–2008 crisis.The next part of the book, which focuses on the principles of financial risk management, first lays out an integrated framework for this difficult endeavor, and then takes a closer look at value-at-risk (VaR), stress testing, and the control of model risk. After these issues are thoroughly explored, the final part ofFinancial Risk Management, Second Editionapplies the principles, previously covered, to each specific type of financial risk: spot risk, forward risk, vanilla options risk, exotic options risk, credit risk, and counterparty credit risk. As each type is discussed, a detailed analysis is given of models used to price these risks as well as how these models can be used to measure and control risk.Focusing on the management of those risks that can be successfully quantified,Financial Risk Management, Second Editionis an essential resource for both seasoned risk professionals and aspiring students. And with its companion website—which contains Microsoft Excel® spreadsheets built specifically to illustrate material in the book—you can quickly begin to develop an intuitive feel for risk measurement and reporting.