Advanced Financial Risk Management: Tools and Techniques for Integrated Credit Risk and Interest Rate Risk Management, 2nd Edition

ISBN: 978-1-118-27854-3
784 pages

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Business & Finance

May 20, 2013

Advanced Financial Risk Management: Tools and Techniques for Integrated Credit Risk and Interest Rate Risk Management, 2nd Edition

If the global credit crisis has taught us anything about financial risk management, it's that the traditional "silo" approach falls fatally short of the mark when it comes to understanding and circumventing the array of institutional risks inherent in virtually all financial and business activities. While the limitations of pre-digital technologies may once have made it seem natural to treat credit risk, market risk, asset and liability management, and performance measurement as separate disciplines, developments in financial theory and computer science not only make it possible for those risks to be analyzed on a fully integrated basis, they mandate it.

Written by a team of internationally recognized experts in the field, Advanced Financial Risk Management, Second Edition schools you in proven tools and techniques for fulfilling that mandate.

The authors lay out a comprehensive strategy for integrating risk management measures, objectives, and hedging techniques that apply to all types of financial institutions. Just as importantly, they develop a framework for creating a dynamic, fully integrated, multi-model risk management system tailored to your specific institutional needs and goals.

Thoroughly updated and revised to reflect the many changes wrought by the 2008 credit crisis, this new edition of the acclaimed guide bridges the gap between idealized assumptions about valuation and the realities of day-to-day risk management actions with:

  • Detailed explanations of which models performed well during the credit crisis, as well as the reasons why other models failed to measure up
  • Proven tools and techniques for constructing a risk management system that protects institutional assets while measuring risk-adjusted shareholder value
  • Guidance on how to construct continuous yield curves for everything from equity options to mortgage-backed securities
  • Performance measurement techniques that go far beyond traditional methods of capital allocation and measuring risk-adjusted shareholder value creation
  • Clear, accessible expositions of fixed income mathematics, duration, convexity, term structure models, risk-neutral instruments, derivatives, advanced hedging, and more
  • Detailed discussions of the analytics of interest rate risk, credit risk, foreign exchange risk, and capital allocation
  • In-depth discussions of the false assumptions behind many accepted risk management models and how to avoid falling prey to them
  • A strong case for why a realistic computer simulation that has no "closed form" mathematical solution is, in most cases, the best, most accurate way to describe risk.

Describing a strategic integrated multi-model approach to risk management designed to insulate institutions from catastrophic events such as those that unfolded during the credit crisis, Advanced Financial Risk Management, Second Edition is an indispensable working resource for commercial bank lenders, insurance company lenders, credit derivatives dealers, securities firms and bankers.