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Financial Risk Manager Handbook + Test Bank: FRM Part I / Part II, 6th Edition

Book Description

The essential reference for financial risk management

Filled with in-depth insights and practical advice, the Financial Risk Manager Handbook is the core text for risk management training programs worldwide. Presented in a clear and consistent fashion, this completely updated Sixth Edition, mirrors recent updates to the new two-level Financial Risk Manager (FRM) exam, and is fully supported by GARP as the trusted way to prepare for the rigorous and renowned FRM certification. This valuable new edition includes an exclusive collection of interactive multiple-choice questions from recent FRM exams.

Financial Risk Manager Handbook, Sixth Edition supports candidates studying for the Global Association of Risk Professional's (GARP) annual FRM exam and prepares you to assess and control risk in today's rapidly changing financial world. Authored by renowned risk management expert Philippe Jorion, with the full support of GARP, this definitive guide summarizes the core body of knowledge for financial risk managers.

  • Offers valuable insights on managing market, credit, operational, and liquidity risk

  • Examines the importance of structured products, futures, options, and other derivative instruments

  • Contains new material on extreme value theory, techniques in operational risk management, and corporate risk management

  • Financial Risk Manager Handbook is the most comprehensive guide on this subject, and will help you stay current on best practices in this evolving field. The FRM Handbook is the official reference book for GARP's FRM certification program.

    Find companion materials to applicable Wiley titles athttp://booksupport.wiley.com

    Table of Contents

    1. Cover
    2. Series
    3. Title Page
    4. Copyright
    5. Preface
    6. About the Author
    7. About GARP
      1. FINANCIAL RISK MANAGER (FRMĀ®) CERTIFICATION
      2. OTHER GARP CERTIFICATIONS
      3. GARP DIGITAL LIBRARY
      4. GARP EVENTS AND NETWORKING
    8. Introduction
    9. Part One: Foundations of Risk Management
      1. Chapter 1: Risk Management
        1. 1.1 RISK MEASUREMENT
        2. 1.2 EVALUATION OF THE RISK MEASUREMENT PROCESS
        3. 1.3 PORTFOLIO CONSTRUCTION
        4. 1.4 ASSET PRICING THEORIES
        5. 1.5 VALUE OF RISK MANAGEMENT
        6. 1.6 IMPORTANT FORMULAS
        7. 1.7 ANSWERS TO CHAPTER EXAMPLES
    10. Part Two: Quantitative Analysis
      1. Chapter 2: Fundamentals of Probability
        1. 2.1 CHARACTERIZING RANDOM VARIABLES
        2. 2.2 MULTIVARIATE DISTRIBUTION FUNCTIONS
        3. 2.3 FUNCTIONS OF RANDOM VARIABLES
        4. 2.4 IMPORTANT DISTRIBUTION FUNCTIONS
        5. 2.5 DISTRIBUTION OF AVERAGES
        6. 2.6 IMPORTANT FORMULAS
        7. 2.7 ANSWERS TO CHAPTER EXAMPLES
        8. 2.8 APPENDIX A: REVIEW OF MATRIX MULTIPLICATION
        9. 2.9 APPENDIX B: NORMAL DISTRIBUTION
      2. Chapter 3: Fundamentals of Statistics
        1. 3.1 PARAMETER ESTIMATION
        2. 3.2 REGRESSION ANALYSIS
        3. 3.3 IMPORTANT FORMULAS
        4. 3.4 ANSWERS TO CHAPTER EXAMPLES
      3. Chapter 4: Monte Carlo Methods
        1. 4.1 SIMULATIONS WITH ONE RANDOM VARIABLE
        2. 4.2 IMPLEMENTING SIMULATIONS
        3. 4.3 MULTIPLE SOURCES OF RISK
        4. 4.4 IMPORTANT FORMULAS
        5. 4.5 ANSWERS TO CHAPTER EXAMPLES
      4. Chapter 5: Modeling Risk Factors
        1. 5.1 REAL DATA
        2. 5.2 NORMAL AND LOGNORMAL DISTRIBUTIONS
        3. 5.3 DISTRIBUTIONS WITH FAT TAILS
        4. 5.4 TIME VARIATION IN RISK
        5. 5.5 IMPORTANT FORMULAS
        6. 5.6 ANSWERS TO CHAPTER EXAMPLES
    11. Part Three: Financial Markets and Products
      1. Chapter 6: Bond Fundamentals
        1. 6.1 DISCOUNTING, PRESENT VALUE, AND FUTURE VALUE
        2. 6.2 PRICE-YIELD RELATIONSHIP
        3. 6.3 BOND PRICE DERIVATIVES
        4. 6.4 DURATION AND CONVEXITY
        5. 6.5 IMPORTANT FORMULAS
        6. 6.6 ANSWERS TO CHAPTER EXAMPLES
        7. 6.7 APPENDIX: APPLICATIONS OF INFINITE SERIES
      2. Chapter 7: Introduction to Derivatives
        1. 7.1 DERIVATIVES MARKETS
        2. 7.2 FORWARD CONTRACTS
        3. 7.3 FUTURES CONTRACTS
        4. 7.4 SWAP CONTRACTS
        5. 7.5 IMPORTANT FORMULAS
        6. 7.6 ANSWERS TO CHAPTER EXAMPLES
      3. Chapter 8: Option Markets
        1. 8.1 OPTION PAYOFFS
        2. 8.2 OPTION PREMIUMS
        3. 8.3 VALUING OPTIONS
        4. 8.4 OTHER OPTION CONTRACTS
        5. 8.5 VALUING OPTIONS BY NUMERICAL METHODS
        6. 8.6 IMPORTANT FORMULAS
        7. 8.7 ANSWERS TO CHAPTER EXAMPLES
      4. Chapter 9: Fixed-Income Securities
        1. 9.1 OVERVIEW OF DEBT MARKETS
        2. 9.2 FIXED-INCOME SECURITIES
        3. 9.3 PRICING OF FIXED-INCOME SECURITIES
        4. 9.4 FIXED-INCOME RISK
        5. 9.5 ANSWERS TO CHAPTER EXAMPLES
      5. Chapter 10: Fixed-Income Derivatives
        1. 10.1 FORWARD CONTRACTS
        2. 10.2 FUTURES
        3. 10.3 SWAPS
        4. 10.4 Options
        5. 10.5 IMPORTANT FORMULAS
        6. 10.6 ANSWERS TO CHAPTER EXAMPLES
      6. Chapter 11: Equity, Currency, and Commodity Markets
        1. 11.1 EQUITIES
        2. 11.2 EQUITY DERIVATIVES
        3. 11.3 CURRENCIES
        4. 11.4 CURRENCY DERIVATIVES
        5. 11.5 COMMODITIES
        6. 11.6 COMMODITY DERIVATIVES
        7. 11.7 IMPORTANT FORMULAS
        8. 11.8 ANSWERS TO CHAPTER EXAMPLES
    12. Part Four: Valuation and Risk Models
      1. Chapter 12: Introduction to Risk Models
        1. 12.1 INTRODUCTION TO FINANCIAL MARKET RISKS
        2. 12.2 COMPONENTS OF RISK MEASUREMENT SYSTEMS
        3. 12.3 DOWNSIDE RISK MEASURES
        4. 12.4 VAR PARAMETERS
        5. 12.5 STRESS-TESTING
        6. 12.6 VAR: LOCAL VERSUS FULL VALUATION
        7. 12.7 IMPORTANT FORMULAS
        8. 12.8 ANSWERS TO CHAPTER EXAMPLES
      2. Chapter 13: Managing Linear Risk
        1. 13.1 UNITARY HEDGING
        2. 13.2 Optimal Hedging
        3. 13.3 Applications of Optimal Hedging
        4. 13.4 IMPORTANT FORMULAS
        5. 13.5 ANSWERS TO CHAPTER EXAMPLES
      3. Chapter 14: Nonlinear (Option) Risk Models
        1. 14.1 OPTION MODELS
        2. 14.2 OPTION GREEKS
        3. 14.3 OPTION RISKS
        4. 14.4 IMPORTANT FORMULAS
        5. 14.5 ANSWERS TO CHAPTER EXAMPLES
    13. Part Five: Market Risk Management
      1. Chapter 15: Advanced Risk Models: Univariate
        1. 15.1 BACKTESTING
        2. 15.2 EXTREME VALUE THEORY
        3. 15.3 COHERENT RISK MEASURES
        4. 15.4 IMPORTANT FORMULAS
        5. 15.5 ANSWERS TO CHAPTER EXAMPLES
      2. Chapter 16: Advanced Risk Models: Multivariate
        1. 16.1 RISK MAPPING
        2. 16.2 JOINT DISTRIBUTIONS OF RISK FACTORS
        3. 16.3 VAR METHODS
        4. 16.4 LIMITATIONS OF RISK SYSTEMS
        5. 16.5 EXAMPLE
        6. 16.6 IMPORTANT FORMULAS
        7. 16.7 ANSWERS TO CHAPTER EXAMPLES
        8. APPENDIX: SIMPLIFICATION OF THE COVARIANCE MATRIX
      3. Chapter 17: Managing Volatility Risk
        1. 17.1 IMPLIED VOLATILITY
        2. 17.2 IMPLIED CORRELATION
        3. 17.3 VARIANCE SWAPS
        4. 17.4 DYNAMIC TRADING
        5. 17.5 CONVERTIBLE BONDS AND WARRANTS
        6. 17.6 IMPORTANT FORMULAS
        7. 17.7 ANSWERS TO CHAPTER EXAMPLES
      4. Chapter 18: Mortgage-Backed Securities Risk
        1. 18.1 PREPAYMENT RISK
        2. 18.2 SECURITIZATION
        3. 18.3 TRANCHING
        4. 18.4 IMPORTANT FORMULAS
        5. 18.5 ANSWERS TO CHAPTER EXAMPLES
    14. Part Six: Credit Risk Management
      1. Chapter 19: Introduction to Credit Risk
        1. 19.1 SETTLEMENT RISK
        2. 19.2 OVERVIEW OF CREDIT RISK
        3. 19.3 MEASURING CREDIT RISK
        4. 19.4 CREDIT RISK DIVERSIFICATION
        5. 19.5 IMPORTANT FORMULAS
        6. 19.6 ANSWERS TO CHAPTER EXAMPLES
      2. Chapter 20: Measuring Actuarial Default Risk
        1. 20.1 CREDIT EVENT
        2. 20.2 DEFAULT RATES
        3. 20.3 RECOVERY RATES
        4. 20.4 ASSESSING CORPORATE AND SOVEREIGN RATINGS
        5. 20.5 REGULATION OF CREDIT RATING AGENCIES
        6. 20.6 IMPORTANT FORMULAS
        7. 20.7 ANSWERS TO CHAPTER EXAMPLES
      3. Chapter 21: Measuring Default Risk from Market Prices
        1. 21.1 CORPORATE BOND PRICES
        2. 21.2 EQUITY PRICES
        3. 21.3 IMPORTANT FORMULAS
        4. 21.4 ANSWERS TO CHAPTER EXAMPLES
      4. Chapter 22: Credit Exposure
        1. 22.1 CREDIT EXPOSURE BY INSTRUMENT
        2. 22.2 DISTRIBUTION OF CREDIT EXPOSURE
        3. 22.3 EXPOSURE MODIFIERS
        4. 22.4 CREDIT RISK MODIFIERS
        5. 22.5 IMPORTANT FORMULAS
        6. 22.6 ANSWERS TO CHAPTER EXAMPLES
        7. APPENDIX: ISDA MASTER NETTING AGREEMENT
      5. Chapter 23: Credit Derivatives and Structured Products
        1. 23.1 INTRODUCTION
        2. 23.2 CREDIT DEFAULT SWAPS
        3. 23.3 OTHER CONTRACTS
        4. 23.4 STRUCTURED PRODUCTS
        5. 23.5 CDO Market
        6. 23.6 DISCUSSION
        7. 23.7 IMPORTANT FORMULAS
        8. 23.8 ANSWERS TO CHAPTER EXAMPLES
      6. Chapter 24: Managing Credit Risk
        1. 24.1 MEASURING THE DISTRIBUTION OF CREDIT LOSSES
        2. 24.2 MEASURING EXPECTED CREDIT LOSS
        3. 24.3 MEASURING CREDIT VAR
        4. 24.4 PORTFOLIO CREDIT RISK MODELS
        5. 24.5 CONCLUSIONS
        6. 24.6 IMPORTANT FORMULAS
        7. 24.7 ANSWERS TO CHAPTER EXAMPLES
    15. Part Seven: Operational and Integrated Risk Management
      1. Chapter 25: Operational Risk
        1. 25.1 IMPORTANCE OF OPERATIONAL RISK
        2. 25.2 IDENTIFYING OPERATIONAL RISK
        3. 25.3 ASSESSING OPERATIONAL RISK
        4. 25.4 MANAGING OPERATIONAL RISK
        5. 25.5 THE BASEL OPERATIONAL RISK CHARGE
        6. 25.6 IMPORTANT FORMULAS
        7. 25.7 ANSWERS TO CHAPTER EXAMPLES
        8. APPENDIX: CAUSAL NETWORKS
      2. Chapter 26: Liquidity Risk
        1. 26.1 SOURCES OF LIQUIDITY RISK
        2. 26.2 ASSET LIQUIDITY RISK
        3. 26.3 FUNDING LIQUIDITY RISK
        4. 26.4 MANAGING LIQUIDITY RISK
        5. 26.5 IMPORTANT FORMULAS
        6. 26.6 ANSWERS TO CHAPTER EXAMPLES
      3. Chapter 27: Firmwide Risk Management
        1. 27.1 INTEGRATED RISK MANAGEMENT
        2. 27.2 BEST PRACTICES REPORTS
        3. 27.3 ORGANIZATIONAL STRUCTURE
        4. 27.4 CONTROLLING TRADERS
        5. 27.5 RISK-ADJUSTED PERFORMANCE AND RAROC
        6. 27.6 IMPORTANT FORMULAS
        7. 27.7 ANSWERS TO CHAPTER EXAMPLES
      4. Chapter 28: The Basel Accord
        1. 28.1 STEPS IN THE BASEL ACCORD
        2. 28.2 DEFINITION OF CAPITAL
        3. 28.3 THE BASEL I CREDIT RISK CHARGE
        4. 28.4 ILLUSTRATION: CITIBANK
        5. 28.5 THE BASEL II ACCORD
        6. 28.6 THE MARKET RISK CHARGE
        7. 28.7 CONCLUSIONS
        8. 28.8 IMPORTANT FORMULAS
        9. 28.9 ANSWERS TO CHAPTER EXAMPLES
    16. Part Eight: Investment Risk Management
      1. Chapter 29: Portfolio Risk Management
        1. 29.1 INSTITUTIONAL INVESTORS
        2. 29.2 PERFORMANCE EVALUATION
        3. 29.3 RISK BUDGETING
        4. 29.4 IMPORTANT FORMULAS
        5. 29.5 ANSWERS TO CHAPTER EXAMPLES
      2. Chapter 30: Hedge Fund Risk Management
        1. 30.1 THE HEDGE FUND INDUSTRY
        2. 30.2 LEVERAGE, LONG POSITIONS, AND SHORT POSITIONS
        3. 30.3 HEDGE FUNDS: MARKET RISKS
        4. 30.4 HEDGE FUNDS: SPECIFIC RISKS
        5. 30.5 DEALING WITH HEDGE FUND RISKS
        6. 30.6 IMPORTANT FORMULAS
        7. 30.7 ANSWERS TO CHAPTER EXAMPLES
    17. Index
    18. FRM Test Bank