An Introduction to Value-At-Risk, Fourth Edition

FOREWORD

In today's financial environment, and reflecting high-profile market events over the years such as the collapse of Barings, Orange County, and Enron, we continue to see a far greater focus on all areas of Risk Management. One simple measure of this increasing interest is the growth and focus in the number of risk professionals in today's rapidly changing environment. This increase also reflects the commonly held view that risk management is an integral and indispensable part of any financial organisation today.

Within the Market Risk arena, there are a number of skills required to fulfil your role effectively which are common requirements in most jobs, such as general knowledge about your product area, analytical skills and an intuitive analytical capability to name but a few. Leading on from this, some of the more useful ‘tools of the trade’ within Risk Management include, for instance, knowledge of financial instruments and how they trade; this for cash as well as derivative instruments such as options. But these remain as components of the bigger picture overall. The VaR measure is a fundamental tool within Market Risk Management, and practitioners need to be familiar with it as a concept and its various measurement methodologies. Of course, we must remember that it should not be solely relied upon, but used in conjunction with other tools when managing financial risk. ...