Financial Risk Manager Handbook (eBook)

PHILIPPE JORION is Professor of Finance at the School of Business at the University of California at Irvine. He was also a professor at Columbia, Northwestern, the University of Chicago, and the University of British Columbia. He holds an MBA and a PhD from the University of Chicago and a degree in engineering from the University of Brussels. Dr. Jorion has authored more than a hundred publications--directed towards academics and practitioners--on the topic of risk management and international finance. His work has received several prizes for research. Dr. Jorion has written the first five editions of Financial Risk Manager Handbook (Wiley), as well as Financial Risk Management: Domestic and International Dimensions; Big Bets Gone Bad: Derivatives and Bankruptcy in Orange County; and Value at Risk: The New Benchmark for Managing Financial Risk. He is also a Managing Director in the Risk Management Group at Pacific Alternative Asset Management Company (PAAMCO), a global fund of hedge funds.

Preface ix

About the Author xi

About GARP xiii

Introduction xv

Part One Foundations of Risk Management 1

Chapter 1 Risk Management 3

Part Two Quantitative Analysis 25

Chapter 2 Fundamentals of Probability 27

Chapter 3 Fundamentals of Statistics 61

Chapter 4 Monte Carlo Methods 83

Chapter 5 Modeling Risk Factors 103

Part Three Financial Markets and Products 125

Chapter 6 Bond Fundamentals 127

Chapter 7 Introduction to Derivatives 157

Chapter 8 Option Markets 177

Chapter 9 Fixed-Income Securities 207

Chapter 10 Fixed-Income Derivatives 231

Chapter 11 Equity, Currency, and Commodity Markets 255

Part Four Valuation and Risk Models 281

Chapter 12 Introduction to Risk Models 283

Chapter 13 Managing Linear Risk 311

Chapter 14 Nonlinear (Option) Risk Models 331

Part Five Market Risk Management 355

Chapter 15 Advanced Risk Models: Univariate 357

Chapter 16 Advanced Risk Models: Multivariate 375

Chapter 17 Managing Volatility Risk 405

Chapter 18 Mortgage-Backed Securities Risk 427

Part Six Credit Risk Management 449

Chapter 19 Introduction to Credit Risk 451

Chapter 20 Measuring Actuarial Default Risk 471

Chapter 21 Measuring Default Risk from Market Prices 501

Chapter 22 Credit Exposure 523

Chapter 23 Credit Derivatives and Structured Products 555

Chapter 24 Managing Credit Risk 587

Part Seven Operational and Integrated Risk Management 611

Chapter 25 Operational Risk 613

Chapter 26 Liquidity Risk 639

Chapter 27 Firmwide Risk Management 657

Chapter 28 The Basel Accord 685

Part Eight Investment Risk Management 725

Chapter 29 Portfolio Risk Management 727

Chapter 30 Hedge Fund Risk Management 749

Index 779