Quantitative Risk Management: Concepts, Techniques, and Tools

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Princeton University Press, Sep 26, 2005 - Business & Economics - 538 pages
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The implementation of sound quantitative risk models is a vital concern for all financial institutions, and this trend has accelerated in recent years with regulatory processes such as Basel II. This book provides a comprehensive treatment of the theoretical concepts and modelling techniques of quantitative risk management and equips readers--whether financial risk analysts, actuaries, regulators, or students of quantitative finance--with practical tools to solve real-world problems. The authors cover methods for market, credit, and operational risk modelling; place standard industry approaches on a more formal footing; and describe recent developments that go beyond, and address main deficiencies of, current practice.

The book's methodology draws on diverse quantitative disciplines, from mathematical finance through statistics and econometrics to actuarial mathematics. Main concepts discussed include loss distributions, risk measures, and risk aggregation and allocation principles. A main theme is the need to satisfactorily address extreme outcomes and the dependence of key risk drivers. The techniques required derive from multivariate statistical analysis, financial time series modelling, copulas, and extreme value theory. A more technical chapter addresses credit derivatives. Based on courses taught to masters students and professionals, this book is a unique and fundamental reference that is set to become a standard in the field.

  

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Contents

Basic Concepts in Risk Management
25
Multivariate Models
61
Financial Time Series
116
Copulas and Dependence
184
Aggregate Risk
238
Extreme Value Theory
264
Credit Risk Management
327
Dynamic Credit Risk Models
385
Operational Risk and Insurance Analytics
463
Appendix
494
References
503
Index
529
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About the author (2005)

Alexander J. McNeil is Professor of Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich. Rudiger Frey is Professor of Financial Mathematics at the University of Leipzig. Paul Embrechts, Professor of Insurance Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich, is the coauthor of "Modelling Extremal Events for Insurance and Finance".

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