Measuring Market Risk with Value at Risk

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John Wiley & Sons, 2001 - Business & Economics - 302 pages
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"This book, Measuring Market Risk with Value at Risk by Vipul Bansal and Pietro Penza, has three advantages over earlier works on the subject. First, it takes a decidedly global approach-an essential ingredient for any comprehensive work on market risk. Second, it ties the scientifically grounded, yet intuitively appealing, VaR measure to earlier, more idiosyncratic measures of market risk that are used in specific market environs (e.g., duration in fixed income). Finally, it encompasses all of the accepted approaches to calculating a VaR measure and presents them in a clearly explained fashion with supporting illustrations and completely worked-out examples." -from the Foreword by John F. Marshall, PhD, Principal, Marshall, Tucker & Associates, LLC

"Measuring Market Risk with Value at Risk offers a much-needed intellectual bridge, a translation from the esoteric realm of mathematical finance to the domain of financial managers who seek guidance in applying developments from this important field of research as well as that of MBA-level graduate instruction. I believe the authors have done a commendable job of providing a carefully crafted, highly readable, and most useful work, and intend to recommend it to all those involved in business risk management applications." -Anthony F. Herbst, PhD, Professor of Finance and C.R. and D.S. Carter Chair, The University of Texas, El Paso and Founding editor of The Journal of Financial Engineering (1991-1998)

"Finally there's a book that strikes a balance between rigor and application in the area of risk management in the banking industry. This innovative book is a MUST for both novices and professionals alike." -Robert P. Yuyuenyongwatana, PhD, Associate Professor of Finance, Cameron University

"Measuring Market Risk with Value at Risk is one of the most complete discussions of this emerging topic in finance that I have seen. The authors develop a logical and rigorous framework for using VaR models, providing both historical references and analytical applications." -Kevin Wynne, PhD, Associate Professor of Finance, Lubin School of Business, Pace University
 

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Contents

GLOBAL BANKING INDUSTRY
1
RISK MANAGEMENT APPROACHES
19
Main Characteristics
25
From ALM to Value at RiskMeasuring Financial Risk
32
The Standardized Approach
38
Generalities
44
A SIMPLE INTRODUCTION
61
A Parametric Approach
67
FRACTAL DISTRIBUTIONS
159
The Noah Effect
166
Estimation and Forecasting When Returns
172
Notes
180
EQUITY PRICING
209
DERIVATIVE PRICING
219
CALCULATING VaR AN OVERVIEW
247
PARAMETRIC NORMAL MODELS
255

From SingleAsset Risk to Portfolio Risk
77
Conclusion
83
STATISTICS FOR PRICES AND RETURNS
105
ESTIMATING
129
Autoregressive Conditional Heteroskedasticity Models
135
Forecasting the VarianceCovariance Matrix for VaR Calculations
146
HISTORICAL SIMULATION MODELS
267
MONTE CARLO SIMULATION MODELS
273
FINAL REMARKS LIMITS OF VaR
285
INDEX
293
Copyright

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About the author (2001)

PIETRO PENZA is Manager of the Financial Risk Management practice of PricewaterhouseCoopers' Rome office. He specializes in risk measurement and management, and value-based management. Previously, he worked with Banca Agrileasing as an in-house consultant and business analyst.

VIPUL K. BANSAL, PhD, CFA, CFP, is Associate Professor of Finance at the Peter J. Tobin College of Business at St. John's University. He was cofounder and associate director/treasurer of the International Association of Financial Engineers from 1991-1998. He conducts seminars on wide-ranging topics throughout the world. He has had assignments with numerous leading organizations, including Goldman Sachs, Citicorp, Salomon Smith Barney, Bloomberg, and The World Bank. Bansal is also coauthor of Financial Engineering: The Complete Guide to Financial Innovation.

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