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Quantitative Financial Risk Management: Theory and Practice

Book Description

A Comprehensive Guide to Quantitative Financial Risk Management

Written by an international team of experts in the field, Quantitative Financial Risk Management: Theory and Practice provides an invaluable guide to the most recent and innovative research on the topics of financial risk management, portfolio management, credit risk modeling, and worldwide financial markets.

This comprehensive text reviews the tools and concepts of financial management that draw on the practices of economics, accounting, statistics, econometrics, mathematics, stochastic processes, and computer science and technology. Using the information found in Quantitative Financial Risk Management can help professionals to better manage, monitor, and measure risk, especially in today's uncertain world of globalization, market volatility, and geo-political crisis.

Quantitative Financial Risk Management delivers the information, tools, techniques, and most current research in the critical field of risk management. This text offers an essential guide for quantitative analysts, financial professionals, and academic scholars.

Table of Contents

  1. Cover Page
  2. The Frank J. Fabozzi Series
  3. Title Page
  4. Copyright
  5. Dedication
  6. Contents
  7. Preface
  8. About the Editors
  9. SECTION One: Supervisory Risk Management
    1. CHAPTER 1: Measuring Systemic Risk: Structural Approaches
      1. SYSTEMIC RISK: DEFINITIONS
      2. FROM STRUCTURAL MODELS TO SYSTEMIC RISK
      3. MEASURING SYSTEMIC RISK
      4. SYSTEMIC RISK AND COPULA MODELS
      5. CONCLUSIONS
      6. REFERENCES
    2. CHAPTER 2: Supervisory Requirements and Expectations for Portfolio-Level Counterparty Credit Risk Measurement and Management
      1. INTRODUCTION
      2. REVIEW OF THE LITERATURE
      3. SUPERVISORY REQUIREMENTS FOR CCR
      4. CONCEPTUAL ISSUES IN CCR: RISK VERSUS UNCERTAINTY
      5. CONCLUSIONS
      6. REFERENCES
    3. CHAPTER 3: Nonperforming Loans in the Bank Production Technology
      1. INTRODUCTION
      2. SELECTIVE LITERATURE REVIEW
      3. METHOD
      4. EMPIRICAL APPLICATION
      5. SUMMARY AND CONCLUSION
      6. APPENDIX 3.1 BANK NAMES AND TYPE
      7. REFERENCES
  10. SECTION Two: Risk Models and Measures
    1. CHAPTER 4: A Practical Guide to Regime Switching in Financial Economics
      1. A BRIEF LOOK AT MARKOV REGIME SWITCHING IN ACADEMIC ECONOMICS AND FINANCE
      2. REGIME SWITCHING AND INTEREST RATE PROCESSES
      3. REGIME SWITCHING AND EXCHANGE RATES
      4. REGIME SWITCHING, STOCK RETURNS, AND ASSET ALLOCATION
      5. SINGLE-ASSET MARKOV MODELS
      6. TWO-STATE ESTIMATION
      7. THREE-STATE ESTIMATION
      8. MARKOV MODELS FOR MULTIPLE ASSETS
      9. PRACTICAL APPLICATION OF REGIME SWITCHING MODELS FOR INVESTMENT PURPOSES
      10. INTUITIVE APPEAL OF SUCH MODELS
      11. IMPLEMENTATION CHALLENGES
      12. SELECTING THE “RIGHT” MODEL STRUCTURE
      13. CALIBRATING THE SELECTED MODEL TYPE TO SUITABLE DATA
      14. DRAWING THE RIGHT CONCLUSIONS FROM THE MODEL
      15. REFERENCES
    2. CHAPTER 5: Output Analysis and Stress Testing for Risk Constrained Portfolios
      1. INTRODUCTION
      2. WORST-CASE ANALYSIS
      3. STRESS TESTING VIA CONTAMINATION
      4. CONCLUSIONS AND NEW PROBLEMS
      5. REFERENCES
    3. CHAPTER 6: Risk Measures and Management in the Energy Sector
      1. INTRODUCTION
      2. UNCERTAINTY CHARACTERIZATION VIA SCENARIOS
      3. MEASURES OF RISKS
      4. CASE STUDIES
      5. SUMMARY
      6. REFERENCES
  11. SECTION Three: Portfolio Management
    1. CHAPTER 7: Portfolio Optimization: Theory and Practice
      1. STATIC PORTFOLIO THEORY
      2. IMPORTANCE OF MEANS
      3. STOCHASTIC PROGRAMMING APPROACH TO ASSET LIABILITY MANAGEMENT
      4. SIEMENS INNOALM PENSION FUND MODEL
      5. DYNAMIC PORTFOLIO THEORY AND PRACTICE: THE KELLY CAPITAL GROWTH APPROACH
      6. TRANSACTIONS COSTS
      7. SOME GREAT INVESTORS
      8. APPENDIX 7.1: ESTIMATING UTILITY FUNCTIONS AND RISK AVERSION
      9. REFERENCES
    2. CHAPTER 8: Portfolio Optimization and Transaction Costs
      1. INTRODUCTION
      2. LITERATURE REVIEW ON TRANSACTION COSTS
      3. AN LP COMPUTABLE RISK MEASURE: THE SEMI-MAD
      4. MODELING TRANSACTION COSTS
      5. NON-UNIQUE MINIMUM RISK PORTFOLIO
      6. EXPERIMENTAL ANALYSIS
      7. CONCLUSIONS
      8. APPENDIX
      9. REFERENCES
    3. CHAPTER 9: Statistical Properties and Tests of Efficient Frontier Portfolios
      1. INTRODUCTION
      2. NOTATION AND SETUP
      3. DISTRIBUTION OF PORTFOLIO WEIGHTS
      4. EMPIRICAL STUDY
      5. DISCUSSION AND CONCLUDING REMARKS
      6. REFERENCES
  12. SECTION Four: Credit Risk Modelling
    1. CHAPTER 10: Stress Testing for Portfolio Credit Risk: Supervisory Expectations and Practices
      1. INTRODUCTION AND MOTIVATION
      2. CONCEPTUAL ISSUES IN STRESS TESTING: RISK VERSUS UNCERTAINTY
      3. THE FUNCTION OF STRESS TESTING
      4. SUPERVISORY REQUIREMENTS AND EXPECTATIONS
      5. EMPIRICAL METHODOLOGY: A SIMPLE ST EXAMPLE
      6. CONCLUSION AND FUTURE DIRECTIONS
      7. REFERENCES
    2. CHAPTER 11: A Critique of Credit Risk Models with Evidence from Mid-Cap Firms
      1. INTRODUCTION
      2. SUMMARY OF CREDIT MODEL METHODOLOGIES
      3. OUR EMPIRICAL METHODOLOGY
      4. CRITIQUE
      5. CONCLUSIONS
      6. REFERENCES
    3. CHAPTER 12: Predicting Credit Ratings Using a Robust Multicriteria Approach
      1. INTRODUCTION
      2. CREDIT SCORING AND RATING
      3. MULTICRITERIA METHODOLOGY
      4. EMPIRICAL ANALYSIS
      5. CONCLUSIONS AND FUTURE PERSPECTIVES
      6. REFERENCES
  13. SECTION Five: Financial Markets
    1. CHAPTER 13: Parameter Analysis of the VPIN (Volume-Synchronized Probability of Informed Trading) Metric
      1. INTRODUCTION
      2. DEFINITION OF VPIN
      3. COMPUTATIONAL COST
      4. OPTIMIZATION OF FPR
      5. UNCERTAINTY QUANTIFICATION (UQ)
      6. CONCLUSION
      7. REFERENCES
    2. CHAPTER 14: Covariance Specification Tests for Multivariate GARCH Models 1
      1. INTRODUCTION
      2. COVARIANCE SPECIFICATION TESTS
      3. APPLICATION OF COVARIANCE SPECIFICATION TESTS
      4. EMPIRICAL FINDINGS AND DISCUSSION
      5. CONCLUSION
      6. REFERENCES
    3. CHAPTER 15: Accounting Information in the Prediction of Securities Class Actions
      1. INTRODUCTION
      2. LITERATURE REVIEW
      3. METHODOLOGY
      4. DATA
      5. RESULTS
      6. CONCLUSIONS
      7. REFERENCES
  14. About the Contributors
  15. Glossary
  16. Index