Measuring Market Risk provides an overview of the state-of-the-art in Value at Risk (VaR) and Expected Tail Loss (ETL) estimation. It also comes with software – a Measuring Market Risk Toolbox written in Matlab, with about 150 risk measurement functions and a manual; and a selection of Excel workbooks giving illustative examples of basic risk measurement functions. Measuring Market Risk is divided into 11 chapters: an introduction, providing a background on the risk measurement revolution; a chapter on the main measures of financial risk, focusing particularly on Value-at-risk (VaR) and Expected Tail Loss (ETL); an introductory chapter on basic issues in market risk measurement (data issues, parametric vs. non-parametric estimation, etc.); a chapter on non-parametric VaR and ETL (historical simulation, principal components, etc.); a chapter on parametric VaR estimation (estimation based on normal, lognormal, Student-t, extreme-value distributions, etc.), a chapter on simulation approaches to market risk measurement; and chapter on incremental and component risks, liquidity risks, backtesting, stress-testing, and dealing with model risk. There are also two appendices dealing with mapping positions to underlying risk factors, and with delta-gamma and related approaches to risk measurement. These chapters are then followed by 7 risk measurement ‘tools’, each focusing on a particular technique useful for market risk measurement: the use of order-statistics theory to estimate VaR and ETL; the Cornish-Fisher expansion (which is useful for making adjustments for ‘small’ departures from normality); the bootstrap (which is useful for estimating VaR and ETL confidence intervals); principal components analysis; extreme-value theory; Monte Carlo simulation methods; and forecasting volatilities, covariances and correlations.
Book Details:
- Author: Kevin Dowd
- ISBN: 9780470855218
- Year Published: 2003
- Pages: 392
- BISAC: BUS036000, BUSINESS & ECONOMICS/Investments & Securities / General
About the Book and Topic:
Measuring Market Risk provides an overview of the state-of-the-art in Value at Risk (VaR) and Expected Tail Loss (ETL) estimation. It also comes with software – a Measuring Market Risk Toolbox written in Matlab, with about 150 risk measurement functions and a manual; and a selection of Excel workbooks giving illustative examples of basic risk measurement functions. Measuring Market Risk is divided into 11 chapters: an introduction, providing a background on the risk measurement revolution; a chapter on the main measures of financial risk, focusing particularly on Value-at-risk (VaR) and Expected Tail Loss (ETL); an introductory chapter on basic issues in market risk measurement (data issues, parametric vs. non-parametric estimation, etc.); a chapter on non-parametric VaR and ETL (historical simulation, principal components, etc.); a chapter on parametric VaR estimation (estimation based on normal, lognormal, Student-t, extreme-value distributions, etc.), a chapter on simulation approaches to market risk measurement; and chapter on incremental and component risks, liquidity risks, backtesting, stress-testing, and dealing with model risk. There are also two appendices dealing with mapping positions to underlying risk factors, and with delta-gamma and related approaches to risk measurement. These chapters are then followed by 7 risk measurement ‘tools’, each focusing on a particular technique useful for market risk measurement: the use of order-statistics theory to estimate VaR and ETL; the Cornish-Fisher expansion (which is useful for making adjustments for ‘small’ departures from normality); the bootstrap (which is useful for estimating VaR and ETL confidence intervals); principal components analysis; extreme-value theory; Monte Carlo simulation methods; and forecasting volatilities, covariances and correlations.
Market risk is seen as the most important area within finance as institutions work to better manage the risk resulting from adverse movements in the market. Finance practitioners ranging from front to back office staff, require an understanding of market risk and how to manage it. This book is based on the successful book by Dowd, which has been very well received, most especially for its clear and accessible exposition of this complex issue.
* Includes a Measuring Market Risk Toolbox written in Matlab and Excel workbooks. * Covers seven risk measurement tools, the Cornish-Fisher expansion, the bootstrap, Monte Carlo simulation methods, and much more.
About the Author
Kevin Dowd (Nottingham, UK) is Professor of Financial Risk Management at Nottingham University Business School. He is the author of Beyond Value at Risk: The New Science of Risk Management (Wiley: 0-471-97621-0). Dowd regularly has articles published in Financial Engineering News and Derivatives Professional.