A Probability Metrics Approach to Financial Risk Measures / Edition 1

Hardcover (Print)
Buy New
Buy New from BN.com
$166.00
Used and New from Other Sellers
Used and New from Other Sellers
from $155.57
Usually ships in 1-2 business days
(Save 25%)
Other sellers (Hardcover)
  • All (8) from $155.57   
  • New (4) from $163.38   
  • Used (4) from $0.00   

Overview

A Probability Metrics Approach to Financial Risk Measures relates the field of probability metrics and risk measures to one another and applies them to finance for the first time.

  • Helps to answer the question: which risk measure is best for a given problem?
  • Finds new relations between existing classes of risk measures
  • Describes applications in finance and extends them where possible
  • Presents the theory of probability metrics in a more accessible form which would be appropriate for non-specialists in the field
  • Applications include optimal portfolio choice, risk theory, and numerical methods in finance
  • Topics requiring more mathematical rigor and detail are included in technical appendices to chapters
Read More Show Less

What People Are Saying

From the Publisher
The authors should be applauded for providing a unique and very readable account of probability metrics and the application of this specialized field to financial problems.

Professor Carol Alexander, Henley Business School at Reading

This self-contained book covering the important field of probability metrics is a wonderful addition to the literature in financial economics. What makes it unique is that it presents this area at a level accessible to those without extensive prior experience-academic and practitioner alike.

Petter Kolm, New York University

Read More Show Less

Product Details

  • ISBN-13: 9781405183697
  • Publisher: Wiley
  • Publication date: 3/1/2011
  • Edition number: 1
  • Pages: 392
  • Product dimensions: 5.90 (w) x 9.10 (h) x 1.10 (d)

Meet the Author

Svetlozar (Zari) T. Rachev is Chair-Professor in Statistics, Econometrics and Mathematical Finance at the University of Karlsruhe in the School of Economics and Business Engineering. He is also Professor Emeritus at the University of California, Santa Barbara in the Department of Statistics and Applied Probability. He has published seven monographs, eight handbooks and special-edited volumes, and over 300 research articles. His recently coauthored books published by Wiley in mathematical finance and financial econometrics include Fat-Tailed and Skewed Asset Return Distributions: Implications for Risk Management, Portfolio selection, and Option Pricing (2005), Operational Risk: A Guide to Basel II Capital Requirements, Models, and Analysis (2007), Financial Econometrics: From Basics to Advanced Modeling Techniques (2007), and Bayesian Methods in Finance (2008).  He is cofounder of Bravo Group, now FinAnalytica, specializing in  financial risk-management software, for which he serves as Chief Scientist.

Stoyan V. Stoyanov, Ph.D. is the Head of Quantitative Research at FinAnalytica specializing in financial risk management software. He is author and co-author of numerous papers some of which have recently appeared in Economics Letters, Journal of Banking and Finance, Applied Mathematical Finance, Applied Financial Economics, and International Journal of Theoretical and Applied Finance. He is a coauthor of the mathematical finance book Advanced Stochastic Models, Risk Assessment and Portfolio Optimization: the Ideal Risk, Uncertainty and Performance Measures (2008) published by Wiley. Dr. Stoyanov has years of experience in applying optimal portfolio theory and market risk estimation methods when solving practical problems of clients of FinAnalytica.

Frank J. Fabozzi is Professor in the Practice of Finance in the School of Management at Yale University. Prior to joining the Yale faculty, he was a Visiting Professor of Finance in the Sloan School at MIT. Professor Fabozzi is a Fellow of the International Center for Finance at Yale University and on the Advisory Council for the Department of Operations Research and Financial Engineering at Princeton University. He is the editor of the Journal of Portfolio Management. His recently coauthored books published by Wiley in mathematical finance and financial econometrics include The Mathematics of Financial Modeling and Investment  Management (2004), Financial Modeling of the Equity Market: From CAPM to Cointegration (2006), Robust Portfolio Optimization and Management (2007), Financial Econometrics: From Basics to Advanced Modeling Techniques (2007), and Bayesian Methods in Finance (2008).

Read More Show Less

Table of Contents

Preface.

About the Authors.Chapter 1 Introduction.

1.1 Probability Metrics.

1.2 Applications in Finance.

Chapter 2 Probability Distances and Metrics.

2.1 Introduction.

2.2 Some Examples of Probability Metrics.

2.2.1 Engineer's metric.

2.2.2 Uniform (or Kolmogorov) metric.

2.2.3 Levy metric.

2.2.4 Kantorovich metric.

2.2.5 Lp-metrics between distribution functions.

2.2.6 Ky Fan metrics.

2.2.7 Lp-metric.

2.3 Distance and Semidistance Spaces.

2.4 Definitions of Probability Distances and Metrics.

2.5 Summary.

2.6 Technical Appendix.

2.6.1 Universally measurable separable metric spaces.

2.6.2 The equivalence of the notions of p. (semi-)distance on P2 and on X.

Chapter 3 Choice Under Uncertainty.

3.1 Introduction.

3.2 Expected Utility Theory.

3.2.1 St. Petersburg Paradox.

3.2.2 The von Neumann-Morgenstern expected utility theory.

3.2.3 Types of utility functions.

3.3 Stochastic Dominance.

3.3.1 First-order stochastic dominance.

3.3.2 Second-order stochastic dominance.

3.3.3 Rothschild-Stiglitz stochastic dominance.

3.3.4 Third-order stochastic dominance.

3.3.5 Efficient sets and the portfolio choice problem.

3.3.6 Return versus payoff.

3.4 Probability Metrics and Stochastic Dominance.

3.5 Cumulative Prospect Theory.

3.6 Summary.

3.7 Technical Appendix.

3.7.1 The axioms of choice.

3.7.2 Stochastic dominance relations of order n.

3.7.3 Return versus payoff and stochastic dominance.

3.7.4 Other stochastic dominance relations.

Chapter 4 A Classification of Probability Distances.

4.1 Introduction.

4.2 Primary Distances and Primary Metrics.

4.3 Simple Distances and Metrics.

4.4 Compound Distances and Moment Functions.

4.5 Ideal Probability Metrics.

4.5.1 Interpretation and examples of ideal probability metrics.

4.5.2 Conditions for boundedness of ideal probability metrics.

4.6 Summary.

4.7 Technical Appendix.

4.7.1 Examples of primary distances.

4.7.2 Examples of simple distances.

4.7.3 Examples of compound distances.

4.7.4 Examples of moment functions.

Chapter 5 Risk and Uncertainty.

5.1 Introduction.

5.2 Measures of Dispersion.

5.2.1 Standard deviation.

5.2.2 Mean absolute deviation.

5.2.3 Semi-standard deviation.

5.2.4 Axiomatic description.

5.2.5 Deviation measures.

5.3 Probability Metrics and Dispersion Measures.

5.4 Measures of Risk.

5.4.1 Value-at-risk.

5.4.2 Computing portfolio VaR in practice.

5.4.3 Back-testing of VaR.

5.4.4 Coherent risk measures.

5.5 Risk Measures and Dispersion Measures.

5.6 Risk Measures and Stochastic Orders.

5.7 Summary.

5.8 Technical Appendix.

5.8.1 Convex risk measures.

5.8.2 Probability metrics and deviation measures.

5.8.3 Deviation measures and probability quasi-metrics.

Chapter 6 Average Value-at-Risk.

6.1 Introduction.

6.2 Average Value-at-Risk.

6.2.1 AVaR for stable distributions.

6.3 AVaR Estimation From a Sample.

6.4 Computing Portfolio AVaR in Practice.

6.4.1 The multivariate normal assumption.

6.4.2 The Historical Method.

6.4.3 The Hybrid Method.

6.4.4 The Monte Carlo Method.

6.4.5 Kernel methods.

6.5 Back-testing of AVaR.

6.6 Spectral Risk Measures.

6.7 Risk Measures and Probability Metrics.

6.8 Risk Measures Based on Distortion Functionals.

6.9 Summary.

6.10 Technical Appendix.

6.10.1 Characteristics of conditional loss distributions.

6.10.2 Higher-order AVaR.

6.10.3 The minimization formula for AVaR.

6.10.4 ETL vs AVaR.

6.10.5 Kernel-based estimation of AVaR.

6.10.6 Remarks on spectral risk measures.

Chapter 7 Computing AVaR through Monte Carlo.

7.1 Introduction.

7.2 An illustration of Monte Carlo Variability.

7.3 Asymptotic Distribution, Classical Conditions.

7.4 Rate of Convergence to the Normal Distribution.

7.4.1 The effect of tail thickness.

7.4.2 The effect of tail truncation.

7.4.3 Infinite variance distributions.

7.5 Asymptotic Distribution, Heavy-tailed Returns.

7.6 Rate of Convergence, Heavy-tailed Returns.

7.6.1 Stable Paretian distributions.

7.6.2 Student's t distribution.

7.7 On the choice of a distributional model.

7.7.1 Tail behavior and return frequency.

7.7.2 Practical implications.

7.8 Summary.

7.9 Technical Appendix.

7.9.1 Proof of the stable limit result.

Chapter 8 Stochastic Dominance Revisited.

8.1 Introduction.

8.2 Metrization of Preference Relations.

8.3 The Hausdorff Metric Structure.

8.4 Examples.

8.4.1 The Levy quasi-semidistance and first-order stochastic dominance.

8.4.2 Higher order stochastic dominance.

8.4.3 The H-quasi-semidistance.

8.4.4 AVaR generated stochastic orders.

8.4.5 Compound quasi-semidistances.

8.5 Utility-type Representations.

8.6 Almost Sstochastic Orders and Degree of Violation.

8.7 Summary.

8.8 Technical Appendix.

8.8.1 Preference relations and topology.

8.8.2 Quasi-semidistances and preference relations.

8.8.3 Construction of quasi-semidistances on classes of investors.

8.8.4 Investors with balanced views.

8.8.5 Structural classification of probability distances.

Index.

Read More Show Less

Customer Reviews

Be the first to write a review
( 0 )
Rating Distribution

5 Star

(0)

4 Star

(0)

3 Star

(0)

2 Star

(0)

1 Star

(0)

Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation

Reminder:

  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

 
Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously

    If you find inappropriate content, please report it to Barnes & Noble
    Why is this product inappropriate?
    Comments (optional)