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An Introduction to Value-At-Risk, Fourth Edition

Book Description

The value-at-risk measurement methodology is a widely-used tool in financial market risk management. The fourth edition of Professor Moorad Choudhry's benchmark reference text An Introduction to Value-at-Risk offers an accessible and reader-friendly look at the concept of VaR and its different estimation methods, and is aimed specifically at newcomers to the market or those unfamiliar with modern risk management practices. The author capitalises on his experience in the financial markets to present this concise yet in-depth coverage of VaR, set in the context of risk management as a whole.

Topics covered include:

Defining value-at-risk

Variance-covariance methodology

Monte Carlo simulation

Portfolio VaR

Credit risk and credit VaR

Topics are illustrated with Bloomberg screens, worked examples, exercises and case studies. Related issues such as statistics, volatility and correlation are also introduced as necessary background for students and practitioners. This is essential reading for all those who require an introduction to financial market risk management and value-at-risk.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Foreword
  7. PREFACE
  8. PREFACE TO THE FIRST EDITION
    1. ACKNOWLEDGEMENTS
  9. About the Author
  10. Chapter 1: INTRODUCTION TO RISK
    1. DEFINING RISK
    2. THE ELEMENTS OF RISK: CHARACTERISING RISK
    3. RISK MANAGEMENT
    4. QUANTITATIVE MEASUREMENT OF RISK
  11. Chapter 2: VOLATILITY AND CORRELATION
    1. STATISTICAL CONCEPTS
    2. VOLATILITY
    3. THE NORMAL DISTRIBUTION AND VaR
    4. CORRELATION
  12. Chapter 3: VALUE-AT-RISK
    1. WHAT IS VaR?
    2. METHODOLOGY
    3. HOW TO CALCULATE VALUE-AT-RISK
    4. COMPARISON BETWEEN METHODS
    5. USE OF VaR MODELS
    6. SUMMARY
  13. Chapter 4: VALUE-AT-RISK FOR FIXED INTEREST INSTRUMENTS
    1. FIXED INCOME PRODUCTS
    2. INTEREST RATE PRODUCTS
    3. APPLYING VaR FOR A FRA
    4. VaR FOR AN INTEREST RATE SWAP
    5. APPLYING VaR FOR A BOND FUTURES CONTRACT
    6. THE HISTORICAL METHOD
    7. SIMULATION METHODOLOGY
    8. BLOOMBERG SCREENS
  14. Chapter 5: OPTIONS: RISK AND VALUE-AT-RISK
    1. OPTION VALUATION USING THE BLACK–SCHOLES MODEL
    2. THE GREEKS
    3. RISK MEASUREMENT
    4. APPLYING VaR FOR OPTIONS
  15. Chapter 6: MONTE CARLO SIMULATION AND VALUE-AT-RISK
    1. INTRODUCTION: MONTE CARLO SIMULATION
  16. Chapter 7: REGULATORY ISSUES AND STRESS-TESTING
    1. CAPITAL ADEQUACY
    2. CAD II
    3. STRESS-TESTING
  17. Chapter 8: CREDIT RISK AND CREDIT VALUE-AT-RISK
    1. TYPES OF CREDIT RISK
    2. CREDIT RATINGS
    3. CREDIT DERIVATIVES
    4. MODELLING CREDIT RISK
    5. CREDITMETRICS
    6. APPLICATIONS OF CREDIT VaR
    7. INTEGRATING THE CREDIT RISK AND MARKET RISK FUNCTIONS
  18. CASE STUDY AND EXERCISES
    1. CASE STUDY – MARKET RISK PROFILE
    2. EXERCISES
  19. APPENDIX: TAYLOR'S EXPANSION
  20. ABBREVIATIONS
  21. SELECTED BIBLIOGRAPHY
  22. INDEX
  23. Other titles by the author