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| Overview |
The first in-depth analysis of inherent deficiencies in present practices 'A book like this helps reduce the chance of a future breakdown in risk management.' Professor Campbell R. Harvey, the Fuqua School of Business, Duke University 'A very timely and extremely useful guide to the subtle and often difficult issues involved in model risk'a subject which is only now gaining the prominence it should always have had.' Professor Kevin Dowd, Nottingham University Business School, the University of Nottingham 'This book collects authoritative papers on a timely and important topic . . . and should lead to many new insights.' Professor Philip Hans Franses, Erasmus School of Economics, Erasmus University 'Inadequate valuation and risk management models have played their part in triggering the recent economic turmoil felt around the world. This timely book, written by experts in the field of model risk, will surely help risk managers and financial engineers measure and manage risk effectively.' Dr. Fabrice Douglas Rouah, Vice President, State Street Corporation 'This invaluable handbook has been edited by experts . . . and should prove to be of great value to investment finance and credit risk modelers in a wide range of disciplines related to portfolio risk, risk modeling in finance, international money and finance, country risk, and macroeconomics.' Professor Michael McAleer, Erasmus School of Economics, Erasmus University About the Book: If we have learned anything from the global financial collapse of 2008, it is this: the mathematical risk models currently used by financial institutions are no longer adequate quantitative measures of risk exposure. In The Risk Modeling Evaluation Handbook, an international team of 48 experts evaluates the problematic risk-modeling methods used by large financial institutions and breaks down how these models contributed to the decline of the global capital markets. Their conclusions enable you to identify the shortcomings of the most widely used risk models and create sophisticated strategies for properly implementing these models into your investing portfolio. Chapters include:
This dream team of the masters of risk modeling provides expansive explanations of the types of model risk that appear in risk measurement, risk management, and pricing, as well as market-tested techniques for mitigating risk in loan, equity, and derivative portfolios. The Risk Modeling Evaluation Handbook is the go-to guide for improving or adjusting your approach to modeling financial risk. |
| About the authors |
Greg N. Gregoriou is professor of finance in the
School of Business and Economics at State
University of New York (Plattsburgh). He is
the author of numerous financial books and
coeditor for the Journal of Derivatives and
Hedge Funds. |
| Table of contents |
Section One: Introduction to Model Risk 1. The Problem of Systemic Risk as a Strong Case for the Lender of Last Resort 2. Learning from Previous Financial Crises and the Necessity to Recognize Liquidity Shocks and the Limits of Arbitrage 3. Valuing Political Risk Section Two: Model Risk Related to Equity and Fixed Income Investments 4. Analysts' Forecasts, Market Risk Premia, and Estimations of Expected Security Returns 5. The Market-timing Ability of Australian Superannuation Funds 6. Caring About Stylized Features of Asset Returns 7. Price Transmissions and Market Risk in Financial Markets 8. Volatility Asymmetry and Leverage 9. The Effects of Different Parameter Estimation Methods on Option Pricing 10. Effects of Benchmark Misspecification on Risk-adjusted Performance Measures Section Three: Model Risk Related to Credit and Credit Derivatives Instruments 11. The Term Structure of Risk in Emerging Markets and Implications for the Carry-trade 12. A Strategic Management Insight into Model Risk in Ratings 13. Tranching a Securitization with the Supervisory Formula 14. Model Risk in the Quantitative and Qualitative Credit Process 15. Model Risk in Highly Correlated Credit Portfolios of Object Financing Section Four: Model Risk Related to Valuation Models 16. Concepts to Validate Valuation Models 17. Model Risk in the Context of Valuing Equity Derivatives 18. Techniques for Mitigating Model Risk Section Five: Limitations to Measure Risk 19. Beyond VaR 20. VaR Computation in a Non-stationary Setting 21. Copula-VaR and Copula-VaR-GARCH Modeling 22. Small-sample Properties of EVT Estimators Section Six: Modeling Market Risk for Risk Markets 23. Model Risk in Counterparty Exposure Modeling 24. Model Risk for Credit Risk Modeling 25. Model Risk in Credit Portfolio Models 26. Model Risk for Market Risk Modeling 27. Evaluating the Adequacy of Market Risk Models 28. Model Risk Related to Operational Risk Models Section Seven: Economic Capital and Asset Allocation 29. Validation of Economic Capital Models 30. Robust Asset Allocation Under Model Risk 31. The Asset-liability Management Compound Option Model |
