An Introduction to Market Risk Measurement

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Beschreibung

  • Includes a CD-ROM that contains Excel workbooks and a Matlab manual and software.
  • Covers the subject without advanced or exotic material.


KEVIN DOWD is Professor of Financial Risk Management at Nottingham University Business School and a member of the School's Centre for Research in Risk and Insurance Studies.

Autorentext
KEVIN DOWD is Professor of Financial Risk Management at Nottingham University Business School and a member of the School's Centre for Research in Risk and Insurance Studies.

Klappentext
This book provides an introduction to Value at Risk (VaR) and expected tail loss (ETL) estimation and is a student-oriented version of Measuring Market Risk (John Wiley & Sons 2002).

An Introduction to Market Risk Measurement includes coverage of:

  • Parametric and non-parametric risk estimation
  • Simulation
  • Numerical Methods
  • Liquidity Risks
  • Risk Decomposition and Budgeting
  • Backtesting
  • Stress Testing
  • Model Risk
Divided into two parts, part one discusses the various risk measurement techniques, whilst part two provides a toolkit of the main tools required to understand market risk measurement. A CD is packaged with the book, containing a MATLAB folder of risk measurement functions, in addition to some examples in Excel/VBA.

Inhalt

Preface xi

Acknowledgements xix

1 The Risk Measurement Revolution 1

1.1 Contributory Factors 1

1.1.1 A Volatile Environment 1

1.1.2 Growth in Trading Activity 2

1.1.3 Advances in Information Technology 2

1.2 Risk Measurement Before VaR 3

1.2.1 Gap Analysis 3

1.2.2 Duration Analysis 4

1.2.3 Scenario Analysis 4

1.2.4 Portfolio Theory 5

1.2.5 Derivatives Risk Measures 6

1.3 Value at Risk 7

1.3.1 The Origin and Development of VaR 7

1.3.2 Attractions of VaR 10

1.3.3 Criticisms of VaR 11

1.4 Recommended Reading 12

2 Measures of Financial Risk 13

2.1 The MeanVariance Framework for Measuring Financial Risk 13

2.1.1 The Normality Assumption 13

2.1.2 Limitations of the Normality Assumption 15

2.1.3 Traditional Approaches to Financial Risk Measurement 18

2.1.3.1 Portfolio Theory 18

2.1.3.2 Duration Approaches to Fixed-income Risk Measurement 18

2.2 Value at Risk 19

2.2.1 VaR Basics 19

2.2.2 Choice of VaR Parameters 24

2.2.3 Limitations of VaR as a Risk Measure 25

2.2.3.1 VaR Uninformative of Tail Losses 25

2.2.3.2 VaR Can Create Perverse Incentive Structures 26

2.2.3.3 VaR Can Discourage Diversification 27

2.2.3.4 VaR Not Sub-additive 27

2.3 Expected Tail Loss 28

2.3.1 Coherent Risk Measures 28

2.3.2 The Expected Tail Loss 29

2.4 Conclusions 33

2.5 Recommended Reading 33

3 Basic Issues in Measuring Market Risk 35

3.1 Data 35

3.1.1 Profit/Loss Data 35

3.1.2 Loss/Profit Data 35

3.1.3 Arithmetic Returns Data 36

3.1.4 Geometric Returns Data 36

3.2 Estimating Historical Simulation VaR 36

3.3 Estimating Parametric VaR 37

3.3.1 Estimating VaR with Normally Distributed Profits/Losses 38

3.3.2 Estimating VaR with Normally Distributed Arithmetic Returns 39

3.3.3 Estimating Lognormal VaR 40

3.4 Estimating Expected Tail Loss 42

3.5 Summary 44

Appendix: Mapping Positions to Risk Factors 45

A3.1 Selecting Core Instruments or Factors 46

A3.1.1 Selecting Core Instruments 46

A3.1.2 Selecting Core Factors 47

A3.2 Mapping Positions and VaR Estimation 47

A3.2.1 The Basic Building Blocks 47

A3.2.1.1 Basic FX Positions 47

A3.2.1.2 Basic Equity Positions 48

A3.2.1.3 Zero-coupon Bonds 50

A3.2.1.4 Basic Forward/Futures 51

A3.2.2 More Complex Positions 52

A3.3 Recommended Reading 53

4 Non-parametric VaR and ETL 55

4.1 Compiling Historical Simulation Data 55

4.2 Estimation of Historical Simulation VaR and ETL 56

4.2.1 Basic Historical Simulation 56

4.2.2 Estimating Curves and Surfaces for VaR and ETL 57

4.3 Estimating Confidence Intervals for Historical Simulation VaR and ETL 58

4.3.1 A Quantile Standard Error Approach to the Estimation of Confidence Intervals for HS VaR and ETL 58

4.3.2 An Order Statistics Approach to the Estimation of Confidence Intervals for HS VaR and ETL 58

4.3.3 A Bootstrap Approach to the Estimation of Confidence Intervals for HS VaR and ETL 59

4.4 Weighted Historical Simulation 61

4.4.1 Age-weighted Historical Simulation 62

4.4.2 Volatility-weighted Historical Simulation 63

4.4.3 Filtered Historical Simulation 64

4.5 Advantages and Disadvantages of Historical Simulation 66

4.5.1 Advantages 66

4.5.2 Disadvantages 67

4.5.2.1 Total Dependence on the Data Set 67

4.5.2.2 Problems of Data Period Length 68

4.6 Principal Components Approaches to VaR and ETL Estimation 68

4.7 Conclusions 69

4.8 Recommended Reading 70

5 Parametric VaR and ETL 71

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Produktinformationen

Titel
An Introduction to Market Risk Measurement
Autor
EAN
9780470855201
ISBN
978-0-470-85520-1
Format
E-Book (pdf)
Herausgeber
Wiley
Genre
Betriebswirtschaft
Veröffentlichung
14.03.2003
Digitaler Kopierschutz
Adobe-DRM
Dateigrösse
1.78 MB
Anzahl Seiten
304
Jahr
2003
Untertitel
Englisch
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