Risk Management and Financial Institutions.
- 6th ed.
- 1 online resource (833 pages)
- Wiley Finance Series .
Cover -- Title Page -- Copyright -- Contents in Brief -- Contents -- Business Snapshots -- Preface -- Chapter 1 Introduction: Risk‐Return Trade‐offs -- 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 -- Part I Financial Institutions -- 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 -- 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 -- Chapter 4 Fund Managers -- 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 -- Part II Financial Markets -- Chapter 5 Financial Instruments -- 5.1 Long and Short Positions in Assets. 5.2 Derivatives Markets -- 5.3 Plain Vanilla Derivatives -- 5.4 Non‐Traditional Derivatives -- 5.5 Exotic Options and Structured Products -- 5.6 Risk Management Challenges -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 6 The OTC Derivatives Market -- 6.1 A Reference Point: Exchange‐Traded Markets -- 6.2 Clearing in OTC Derivatives Markets -- 6.3 Post‐Crisis Regulatory Changes -- 6.4 Impact of the Changes -- 6.5 CCPs and Bankruptcy -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 7 Securitization and the Global Financial Crisis -- 7.1 The U.S. Housing Market -- 7.2 Securitization -- 7.3 The Losses -- 7.4 What Went Wrong? -- 7.5 Lessons from the Global Financial Crisis -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 8 Volatility -- 8.1 Definition of Volatility -- 8.2 Implied Volatilities -- 8.3 Are Daily Percentage Changes in Financial Variables Normal? -- 8.4 The Power Law -- 8.5 Monitoring Daily Volatility -- 8.6 The Exponentially Weighted Moving Average Model -- 8.7 The GARCH(1,1) Model -- 8.8 Choosing between the Models -- 8.9 Maximum Likelihood Methods -- 8.10 Using GARCH(1,1) to Forecast Future Volatility -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 9 Correlations and Copulas -- 9.1 Definition of Correlation -- 9.2 Monitoring Correlation -- 9.3 Correlation and Covariance Matrices -- 9.4 Multivariate Normal Distributions -- 9.5 Copulas -- 9.6 Application to Loan Portfolios: Vasicek's Model -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 10 Valuation and Scenario Analysis. 10.1 Volatility and Asset Prices -- 10.2 Risk‐Neutral Valuation -- 10.3 Scenario Analysis -- 10.4 When Both Worlds Have to Be Used -- 10.5 The Calculations in Practice -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Part III Market Risk -- Chapter 11 Value at Risk and Expected Shortfall -- 11.1 Definition of VaR -- 11.2 Examples of the Calculation of VaR -- 11.3 A Drawback of VaR -- 11.4 Expected Shortfall -- 11.5 Coherent Risk Measures -- 11.6 Choice of Parameters for VaR and ES -- 11.7 Marginal, Incremental, and Component Measures -- 11.8 Euler's Theorem -- 11.9 Aggregating VaRs and ESs -- 11.10 Back‐Testing -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 12 Historical Simulation and Extreme Value Theory -- 12.1 The Methodology -- 12.2 Accuracy of VaR -- 12.3 Extensions -- 12.4 Computational Issues -- 12.5 Extreme Value Theory -- 12.6 Applications of EVT -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 13 Model‐Building Approach -- 13.1 The Basic Methodology -- 13.2 Generalization -- 13.3 The Four‐Index Example Revisited -- 13.4 Extensions of the Basic Procedure -- 13.5 Risk Weights and Weighted Sensitivities -- 13.6 Non‐Linearity -- 13.7 Model‐Building vs. Historical Simulation -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 14 Interest Rate Risk -- 14.1 Types of Rates -- 14.2 Calculating Risk Measures -- 14.3 Principal Components Analysis -- 14.4 The Management of Net Interest Income -- 14.5 Duration -- 14.6 Convexity -- 14.7 Generalization -- 14.8 Nonparallel Yield Curve Shifts -- Summary -- Further Reading. Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 15 Derivatives Risk -- 15.1 Delta -- 15.2 Gamma -- 15.3 Vega -- 15.4 Theta -- 15.5 Rho -- 15.6 Calculating Greek Letters -- 15.7 Taylor Series Expansions -- 15.8 The Realities of Hedging Derivatives -- 15.9 Hedging Exotic Options -- 15.10 Scenario Analysis -- 15.11 Approximate Analytical Results -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 16 Scenario Analysis and Stress Testing -- 16.1 Generating the Scenarios -- 16.2 Regulation -- 16.3 What to Do with the Results -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Part IV Credit Risk -- Chapter 17 Estimating Default Probabilities -- 17.1 Credit Ratings -- 17.2 Historical Default Probabilities -- 17.3 Recovery Rates -- 17.4 Credit Default Swaps -- 17.5 Credit Spreads -- 17.6 Estimating Default Probabilities from Credit Spreads -- 17.7 Comparison of Default Probability Estimates -- 17.8 Using Equity Prices to Estimate Default Probabilities -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 18 xVAs -- 18.1 Credit Exposure on Derivatives -- 18.2 CVA -- 18.3 The Impact of a New Transaction -- 18.4 CVA Risk -- 18.5 Wrong‐Way Risk -- 18.6 DVA -- 18.7 Some Simple Examples -- 18.8 Other xVAs -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 19 Credit Value at Risk -- 19.1 Ratings Transition Matrices -- 19.2 Vasicek's Model -- 19.3 Credit Risk Plus -- 19.4 Creditmetrics -- 19.5 Credit Spread Risk -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Part V Other Risks. Chapter 20 Operational Risk -- 20.1 Defining Operational Risk -- 20.2 Types of Operational Risk -- 20.3 Loss Severity and Loss Frequency -- 20.4 The Standardized Measurement Approach -- 20.5 Preventing Operational Risk Losses -- 20.6 Allocation of Operational Risk Capital -- 20.7 Use of Power Law -- 20.8 Insurance -- 20.9 Sarbanes-Oxley -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 21 Liquidity Risk -- 21.1 Liquidity Trading Risk -- 21.2 Liquidity Funding Risk -- 21.3 Liquidity Black Holes -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 22 Model Risk Management -- 22.1 Regulatory Guidance -- 22.2 Models in Physics and Finance -- 22.3 Simple Models: Expensive Mistakes -- 22.4 Models for Pricing Actively Traded Products -- 22.5 Models for Less Actively Traded Products -- 22.6 Accounting -- 22.7 What Makes a Successful Pricing Model? -- 22.8 Model‐Building Missteps -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 23 Climate Risk, ESG, and Sustainability -- 23.1 Climate Risk -- 23.2 ESG -- 23.3 Sustainability -- 23.4 Greenwashing -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Chapter 24 Enterprise Risk Management -- 24.1 Risk Appetite -- 24.2 Risk Culture -- 24.3 Identifying Major Risks -- 24.4 Strategic Risk Management -- Summary -- Further Reading -- Practice Questions and Problems (Answers at End of Book) -- Further Questions -- Part VI Regulation -- Chapter 25 Basel I, Basel II, and Solvency II -- 25.1 The Reasons for Regulating Banks -- 25.2 Bank Regulation Pre‐1988 -- 25.3 The 1988 BIS Accord -- 25.4 The G‐30 Policy Recommendations -- 25.5 Netting. 25.6 The 1996 Amendment.
RISK MANAGEMENT AND FINANCIAL INSTITUTIONS THE GOLD STANDARD IN FINANCIAL RISK MANAGEMENT TEXTBOOKS In the newly revised sixth edition of Risk Management and Financial Institutions , celebrated risk and derivatives expert John C.Hull delivers an incisive and comprehensive discussion of financial risk and financial institution regulation.