Risk Management: Foundations For a Changing Financial World

Acknowledgments.

Introduction.

PART I: OVERVIEW—TWO DECADES OF RISK MANAGEMENT.

1990–1999.

CHAPTER 1: A Framework for Understanding Market Crisis (Richard M. Bookstaber)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):7–19.

CHAPTER 2: Practical Issues in Choosing and Applying Risk Management Tools (Jacques Longerstaey)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):52–61.

CHAPTER 3: The Three P's of Total Risk Management (Andrew W. Lo)
Reprinted from the Financial Analysts Journal (January/February 1999):13–26.

CHAPTER 4: Reporting and Monitoring Risk Exposure (Robert W. Kopprasch, CFA)
Reprinted from AIMR Conference Proceedings: Risk Management (April 1996): 25–33.

2000–Present.

CHAPTER 5: Risk Management: A Review (Sébastien Lleo, CFA)
Modifi ed from The Research Foundation of CFA Institute (February 2009).

CHAPTER 6: Defining Risk (Glyn A. Holton)
Reprinted from the Financial Analysts Journal (November/December 2004): 19–25.

CHAPTER 7: Value and Risk: Beyond Betas (Aswath Damodaran)
Reprinted from the Financial Analysts Journal (March/April 2005):38–43.

CHAPTER 8: A Simple Theory of the Financial Crisis; or, Why Fischer Black Still Matters (Tyler Cowen)
Reprinted from the Financial Analysts Journal (May/June 2009):17–20.

CHAPTER 9: Managing Firm Risk (Bluford H. Putnam)
Reprinted from AIMR Conference Proceedings: Ethical Issues for Today’s Firm (July 2000):51–61.

CHAPTER 10: Risk Measurement versus Risk Management (D. Sykes Wilford)
Reprinted from AIMR Conference Proceedings: Improving the Investment Process through Risk Management (November 2003):17–21.

PART II: MEASURING RISK.

CHAPTER 11: What Volatility Tells Us about Diversifi cation and Risk Management (Max Darnell)
Reprinted from CFA Institute Conference Proceedings Quarterly (September 2009):57–66.

CHAPTER 12: Risk2: Measuring the Risk in Value at Risk (Philippe Jorion)
Reprinted from the Financial Analysts Journal (November/December 1996): 47–56.

CHAPTER 13: How Risk Management Can Benefi t Portfolio Managers (Michelle McCarthy)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):62–72.

CHAPTER 14: Merging the Risk Management Objectives of the Client and Investment Manager (Bennett W. Golub)
Reprinted from AIMR Conference Proceedings: Exploring the Dimensions of Fixed-Income Management (March 2004):13–23.

CHAPTER 15: The Mismeasurement of Risk (Mark Kritzman, CFA, and Don Rich)
Reprinted from the Financial Analysts Journal (May/June 2002):91–99.

CHAPTER 16: Riskiness in Risk Measurement (Roland Lochoff)
Reprinted from AIMR Conference Proceedings: Exploring the Dimensions of Fixed-Income Management (March 2004):40–51.

CHAPTER 17: The Second Moment (Don Ezra)
Reprinted from the Financial Analysts Journal (January/February 2009): 34–36.

CHAPTER 18: The Sense and Nonsense of Risk Budgeting (Arjan B. Berkelaar, CFA, Adam Kobor, CFA, and Masaki Tsumagari, CFA)
Reprinted from the Financial Analysts Journal (September/October 2006): 63–75.

CHAPTER 19: Understanding and Monitoring the Liquidity Crisis Cycle (Richard Bookstaber)
Reprinted from the Financial Analysts Journal (September/October 2000):17–22.

CHAPTER 20: Why Company-Specifi c Risk Changes over Time (James A. Bennett, CFA, and Richard W. Sias)
Reprinted from the Financial Analysts Journal (September/October 2006): 89–100.

CHAPTER 21: Black Monday and Black Swans (John C. Bogle)
Reprinted from the Financial Analysts Journal (March/April 2008):30–40.

CHAPTER 22: The Uncorrelated Return Myth (Richard M. Ennis, CFA)
Reprinted from the Financial Analysts Journal (November/December 2009):6–7.

PART III: MANAGING RISK.

Alternative Investments.

CHAPTER 23: Risk Management for Hedge Funds: Introduction and Overview (Andrew W. Lo)
Reprinted from the Financial Analysts Journal (November/December 2001): 16–33.

CHAPTER 24: Risk Management for Alternative Investment Strategies (Leslie Rahl)
Reprinted from AIMR Conference Proceedings: Exploring the Dimensions of Fixed-Income Management (March 2004):52–62.

CHAPTER 25: Sources of Change and Risk for Hedge Funds (Clifford S. Asness)
Reprinted from CFA Institute Conference Proceedings: Challenges and Innovation in Hedge Fund Management (August 2004):4–9, 13–14.

CHAPTER 26: Risk Management in a Fund of Funds (S. Luke Ellis)
Reprinted from CFA Institute Conference Proceedings: Challenges and Innovation in Hedge Fund Management (August 2004):31–39.

CHAPTER 27: Hedge Funds: Risk and Return (Burton G. Malkiel and Atanu Saha)
Reprinted from the Financial Analysts Journal (November/December 2005): 80–88.

Credit Risk.

CHAPTER 28: Credit Risk (Jeremy Graveline and Michael Kokalari)
Modifi ed from The Research Foundation of CFA Institute (November 2006).

CHAPTER 29: Tumbling Tower of Babel: Subprime Securitization and the Credit Crisis (Bruce I. Jacobs)
Reprinted from the Financial Analysts Journal (March/April 2009):17–30.

CHAPTER 30: Applying Modern Risk Management to Equity and Credit Analysis (Robert C. Merton)
Reprinted from CFA Institute Conference Proceedings Quarterly (December 2007):14–22.

Derivatives.

CHAPTER 31: The Uses and Risks of Derivatives (Joanne M. Hill)
Reprinted from AIMR Conference Proceedings: Investing Worldwide VI (January 1996):46–58.

CHAPTER 32: Effective Risk Management in the Investment Firm (Mark C. Brickell)
Reprinted from AIMR Conference Proceedings: Risk Management (April 1996):48–55.

CHAPTER 33: Risk-Management Programs (Maarten Nederlof)
Reprinted from AIMR Conference Proceedings: Risk Management (April 1996):15–24.

CHAPTER 34: Does Risk Management Add Value? (Charles W. Smithson)
Reprinted from AIMR Conference Proceedings: Corporate Financial Decision Making and Equity Analysis (July 1995):47–53.

CHAPTER 35: Risk Management and Fiduciary Duties (Robert M. McLaughlin)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):20–31.

Global Risk.

CHAPTER 36: Financial Risk Management in Global Portfolios (R. Charles Tschampion, CFA)
Reprinted from AIMR Conference Proceedings: Investing Worldwide VI (January 1996):67–73.

CHAPTER 37: Universal Hedging: Optimizing Currency Risk and Reward in International Equity Portfolios (Fischer Black)
Reprinted from the Financial Analysts Journal (July/August 1989):16–22.

CHAPTER 38: Strategies for Hedging (Mark P. Kritzman, CFA)
Reprinted from AIMR Conference Proceedings: Managing Currency Risk (November 1997):28–38.

CHAPTER 39: Currency Risk Management in Emerging Markets (H. Gifford Fong)
Reprinted from AIMR Conference Proceedings: Investing Worldwide VII (September 1996):18–23.

CHAPTER 40: Managing Geopolitical Risks (Marvin Zonis)
Reprinted from CFA Institute Conference Proceedings Quarterly (September 2009):22–29.

CHAPTER 41: Country Risk in Global Financial Management (Claude B. Erb, CFA, Campbell R. Harvey, and Tadas E. Viskanta)
Reprinted from The Research Foundation of CFA Institute (January 1998).

CHAPTER 42: Political Risk in the World Economies (Marvin Zonis)
Reprinted from AIMR Conference Proceedings: Investing Worldwide VIII: Developments in Global Portfolio Management (September 1997):1–6.

Nonfi nancial Risk.

CHAPTER 43: A Behavioral Perspective on Risk Management (Andrew W. Lo)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):32–37.

CHAPTER 44: Behavioral Risk: Anecdotes and Disturbing Evidence (Arnold S. Wood)
Reprinted from AIMR Conference Proceedings: Investing Worldwide VI (January 1996):74–78.

CHAPTER 45: The Ten Commandments of Operational Due Diligence (Robert P. Swan III)
Reprinted from CFA Institute Conference Proceedings: Challenges and Innovation in Hedge Fund Management (August 2004):47–52.

CHAPTER 46: Models (Emanuel Derman)
Reprinted from the Financial Analysts Journal (January/February 2009):28–33.

CHAPTER 47: The Use and Misuse of Models in Investment Management (Douglas T. Breeden)
Reprinted from CFA Institute Conference Proceedings Quarterly (December 2009): 36–45.

CHAPTER 48: Regulating Financial Markets: Protecting Us from Ourselves and Others (Meir Statman)
Reprinted from the Financial Analysts Journal (May/June 2009):22–31.

Pension Risk.

CHAPTER 49: Budgeting and Monitoring Pension Fund Risk (William F. Sharpe)
Reprinted from the Financial Analysts Journal (September/October 2002):74–86.

CHAPTER 50: The Plan Sponsor's Perspective on Risk Management Programs (Desmond Mac Intyre)
Reprinted from AIMR Conference Proceedings: Risk Management: Principles and Practices (August 1999):38–44.

CHAPTER 51: Evaluating a Risk-Management Program (Christopher J. Campisano, CFA)
Reprinted from AIMR Conference Proceedings: Risk Management (April 1996):41–47.

CHAPTER 52: Developing and Implementing a Risk-Budgeting System (Leo J. de Bever)
Reprinted from AIMR Conference Proceedings: Improving the Investment Process through Risk Management (November 2003):62–72.

CHAPTER 53: Liability-Driven Investment Strategies for Pension Funds (Roman von Ah)
Reprinted from CFA Institute Conference Proceedings Quarterly (December 2008):39–46.

About the Contributors.

Index.