Understanding Risk The Theory and Practice of Financial Risk Management [Paperback]

Sound risk management often involves a combination of both mathematical and practical aspects. Taking this into account, Understanding Risk: The Theory and Practice of Financial Risk Managementexplains how to understand financial risk and how the severity and frequency of losses can be controlled. It combines a quantitative approach with a more informal style, giving readers a blend of analysis and intuition.

Divided into four parts, the book begins by introducing the basics of risk management and the behavior of financial instruments. The next section focuses on regulatory capital standards and models, addressing value-at-risk (VaR) models, portfolio credit risk, tranching, operational risk, and the Basel accords. The author then deals with asset/liability management (ALM) and liquidity management. The last part explores structured finance and a variety of new trading instruments, including inflation-linked products, sophisticated equity basket options, and convertible bonds.

With numerous exercises, figures, and examples throughout, this book offers valuable insight on various aspects of financial risk management.INTRODUCTION
part 1: Risk Management and the Behavior of Products
Markets, Risks, and Risk Management in Context
Financial Markets Overview
Trading and Market Behavior
Basic Ideas in Risk Management
Culture and Organization
Some External Constraints
Derivatives and Quantitative Market Risk Management
Returns, Options, Sensitivities
Portfolios and Risk Aggregation
Understanding the Behavior of Derivatives
Interest Rate Derivatives and Yield Curve Models
Single Name Credit Derivatives
Valuation, Hedging, and Model Risk
part 2: Economic and Regulatory Capital Models
Capital: Motivation and Provision