Efnisyfirlit

• Business Snapshots
• Preface
• Chapter 1 Introduction
• 1.1 Risk vs. Return for Investors
• 1.2 The Efficient Frontier
• 1.3 The Capital Asset Pricing Model
• 1.4 Arbitrage Pricing Theory
• 1.5 Risk vs. Return for Companies
• 1.6 Risk Management by Financial Institutions
• 1.7 Credit Ratings
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Part One Financial Institutions and Their Trading
• Chapter 2 Banks
• 2.1 Commercial Banking
• 2.2 The Capital Requirements of a Small Commercial Bank
• 2.3 Deposit Insurance
• 2.4 Investment Banking
• 2.5 Securities Trading
• 2.6 Potential Conflicts of Interest in Banking
• 2.7 Today’s Large Banks
• 2.8 The Risks Facing Banks
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 3 Insurance Companies and Pension Plans
• 3.1 Life Insurance
• 3.2 Annuity Contracts
• 3.3 Mortality Tables
• 3.4 Longevity and Mortality Risk
• 3.5 Property‐Casualty Insurance
• 3.6 Health Insurance
• 3.7 Moral Hazard and Adverse Selection
• 3.8 Reinsurance
• 3.9 Capital Requirements
• 3.10 The Risks Facing Insurance Companies
• 3.11 Regulation
• 3.12 Pension Plans
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 4 Mutual Funds, ETFs, and Hedge Funds
• 4.1 Mutual Funds
• 4.2 Exchange‐Traded Funds
• 4.3 Active vs. Passive Management
• 4.4 Regulation
• 4.5 Hedge Funds
• 4.6 Hedge Fund Strategies
• 4.7 Hedge Fund Performance
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 5 Trading in Financial Markets
• 5.1 The Markets
• 5.2 Clearing Houses
• 5.3 Long and Short Positions in Assets
• 5.4 Derivatives Markets
• 5.5 Plain Vanilla Derivatives
• 5.6 Non‐Traditional Derivatives
• 5.7 Exotic Options and Structured Products
• 5.8 Risk Management Challenges
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 6 The Credit Crisis of 2007–2008
• 6.1 The U.S. Housing Market
• 6.2 Securitization
• 6.3 The Losses
• 6.4 What Went Wrong?
• 6.5 Lessons from the Crisis
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 7 Valuation and Scenario Analysis: The Risk-Neutral and Real Worlds
• 7.1 Volatility and Asset Prices
• 7.2 Risk-Neutral Valuation
• 7.3 Scenario Analysis
• 7.4 When Both Worlds Have to Be Used
• 7.5 The Calculations in Practice
• 7.6 Estimating Real-World Processes
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Part Two Market Risk
• Chapter 8 How Traders Manage Their Risks
• 8.1 Delta
• 8.2 Gamma
• 8.3 Vega
• 8.4 Theta
• 8.5 Rho
• 8.6 Calculating Greek Letters
• 8.7 Taylor Series Expansions
• 8.8 The Realities of Hedging
• 8.9 Hedging Exotic Options
• 8.10 Scenario Analysis
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 9 Interest Rate Risk
• 9.1 The Management of Net Interest Income
• 9.2 Types of Rates
• 9.3 Duration
• 9.4 Convexity
• 9.5 Generalization
• 9.6 Nonparallel Yield Curve Shifts
• 9.7 Principal Components Analysis
• 9.8 Gamma and Vega
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 10 Volatility
• 10.1 Definition of Volatility
• 10.2 Implied Volatilities
• 10.3 Are Daily Percentage Changes in Financial Variables Normal?
• 10.4 The Power Law
• 10.5 Monitoring Daily Volatility
• 10.6 The Exponentially Weighted Moving Average Model
• 10.7 The GARCH(1,1) Model
• 10.8 Choosing Between the Models
• 10.9 Maximum Likelihood Methods
• 10.10 Using GARCH(1,1) to Forecast Future Volatility
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 11 Correlations and Copulas
• 11.1 Definition of Correlation
• 11.2 Monitoring Correlation
• 11.3 Correlation and Covariance Matrices
• 11.4 Multivariate Normal Distributions
• 11.5 Copulas
• 11.6 Application to Loan Portfolios: Vasicek’s Model
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 12 Value at Risk and Expected Shortfall
• 12.1 Definition of VaR
• 12.2 Examples of the Calculation of VaR
• 12.3 A Drawback of VaR
• 12.4 Expected Shortfall
• 12.5 Coherent Risk Measures
• 12.6 Choice of Parameters for VaR and ES
• 12.7 Marginal, Incremental, and Component Measures
• 12.8 Euler’s Theorem
• 12.9 Aggregating VaRs and ESs
• 12.10 Back-Testing
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 13 Historical Simulation and Extreme Value Theory
• 13.1 The Methodology
• 13.2 Accuracy of VaR
• 13.3 Extensions
• 13.4 Computational Issues
• 13.5 Extreme Value Theory
• 13.6 Applications of EVT
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 14 Model-Building Approach
• 14.1 The Basic Methodology
• 14.2 Generalization
• 14.3 The Four-Index Example Revisited
• 14.4 Handling Term Structures
• 14.5 Extensions of the Basic Procedure
• 14.6 Risk Weights and Weighted Sensitivities
• 14.7 Handling Non-Linearity
• 14.8 Model-Building vs. Historical Simulation
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Part Three Regulation
• Chapter 15 Basel I, Basel II, and Solvency II
• 15.1 The Reasons for Regulating Banks
• 15.2 Bank Regulation Pre-1988
• 15.3 The 1988 BIS Accord
• 15.4 The G-30 Policy Recommendations
• 15.5 Netting
• 15.6 The 1996 Amendment
• 15.7 Basel II
• 15.8 Credit Risk Capital Under Basel II
• 15.9 Operational Risk Capital Under Basel II
• 15.10 Pillar 2: Supervisory Review
• 15.11 Pillar 3: Market Discipline
• 15.12 Solvency II
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 16 Basel II.5, Basel III, and Other Post-Crisis Changes
• 16.1 Basel II.5
• 16.2 Basel III
• 16.3 Contingent Convertible Bonds
• 16.4 Use of Standardized Approaches and SA-CCR
• 16.5 Dodd–Frank Act
• 16.6 Legislation in Other Countries
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 17 Regulation of the OTC Derivatives Market
• 17.1 Clearing in OTC Markets
• 17.2 Post-Crisis Regulatory Changes
• 17.3 Impact of the Changes
• 17.4 CCPs and Bankruptcy
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 18 Fundamental Review of the Trading Book
• 18.1 Background
• 18.2 Standardized Approach
• 18.3 Internal Models Approach
• 18.4 Trading Book vs. Banking Book
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Question
• Notes
• Part Four Credit Risk
• Chapter 19 Estimating Default Probabilities
• 19.1 Credit Ratings
• 19.2 Historical Default Probabilities
• 19.3 Recovery Rates
• 19.4 Credit Default Swaps
• 19.5 Credit Spreads
• 19.6 Estimating Default Probabilities from Credit Spreads
• 19.7 Comparison of Default Probability Estimates
• 19.8 Using Equity Prices to Estimate Default Probabilities
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 20 CVA and DVA
• 20.1 Credit Exposure on Derivatives
• 20.2 CVA
• 20.3 The Impact of a New Transaction
• 20.4 CVA Risk
• 20.5 Wrong-Way Risk
• 20.6 DVA
• 20.7 Some Simple Examples
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 21 Credit Value at Risk
• 21.1 Ratings Transition Matrices
• 21.2 Vasicek’s Model
• 21.3 Credit Risk Plus
• 21.4 Creditmetrics
• 21.5 Credit Spread Risk
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Part Five Other Topics
• Chapter 22 Scenario Analysis and Stress Testing
• 22.1 Generating the Scenarios
• 22.2 Regulation
• 22.3 What to Do with the Results
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 23 Operational Risk
• 23.1 Defining Operational Risk
• 23.2 Categorization of Operational Risks
• 23.3 Regulatory Capital Under Basel II
• 23.4 The Standardized Measurement Approach
• 23.5 Preventing Operational Risk Losses
• 23.6 Allocation of Operational Risk Capital
• 23.7 Use of Power Law
• 23.8 Insurance
• 23.9 Sarbanes–Oxley
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 24 Liquidity Risk
• 24.1 Liquidity Trading Risk
• 24.2 Liquidity Funding Risk
• 24.3 Liquidity Black Holes
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 25 Model Risk Management
• 25.1 Regulatory Requirements
• 25.2 Models in Physics and Finance
• 25.3 Simple Models: Expensive Mistakes
• 25.4 Models for Pricing Actively Traded Products
• 25.5 Models for Less Actively Traded Products
• 25.6 Accounting
• 25.7 What Makes a Successful Pricing Model?
• 25.8 Model Building Missteps
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 26 Economic Capital and RAROC
• 26.1 Definition of Economic Capital
• 26.2 Components of Economic Capital
• 26.3 Shapes of the Loss Distributions
• 26.4 Relative Importance of Risks
• 26.5 Aggregating Economic Capital
• 26.6 Allocation of Economic Capital
• 26.7 Deutsche Bank’s Economic Capital
• 26.8 RAROC
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 27 Enterprise Risk Management
• 27.1 Risk Appetite
• 27.2 Risk Culture
• 27.3 Identifying Major Risks
• 27.4 Strategic Risk Management
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 28 Financial Innovation
• 28.1 Technological Advances
• 28.2 Payment Systems
• 28.3 Lending
• 28.4 Wealth Management
• 28.5 Insurance
• 28.6 Regulation and Compliance
• 28.7 How Should Financial Institutions Respond?
• Summary
• Further Reading
• Practice Questions and Problems (Answers at End of Book)
• Further Questions
• Notes
• Chapter 29 Risk Management Mistakes to Avoid
• 29.1 Risk Limits
• 29.2 Managing the Trading Room
• 29.3 Liquidity Risk
• 29.4 Lessons for Nonfinancial Corporations
• 29.5 A Final Point
• Further Reading
• Notes
• Part Six Appendices
• Appendix A Compounding Frequencies for Interest Rates
• Notes
• Appendix B Zero Rates, Forward Rates, and Zero-Coupon Yield Curves
• Appendix C Valuing Forward and Futures Contracts
• Appendix D Valuing Swaps
• Notes
• Appendix E Valuing European Options
• Notes
• Appendix F Valuing American Options
• Notes
• Appendix G Taylor Series Expansions
• Appendix H Eigenvectors and Eigenvalues
• Notes
• Appendix I Principal Components Analysis
• Appendix J Manipulation of Credit Transition Matrices
• Notes
• Appendix K Valuation of Credit Default Swaps
• Appendix L Synthetic CDOs and Their Valuation
• Notes
• Answers to Questions and Problems
• Glossary
• RMFI Software
• Table for N(x) When x ≥ 0
• Table for N(x) When x ≤ 0
• Index
• EULA