Risk Management in Banking / Edition 3

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This new edition has been fully revised and updated to reflect new developments in the field, the latest research, and the changing emphasis in current practice. It considers all aspects of risk management, a vital topic within the banking industry, including: asset liability management, risk-based capital, value at risk, loan portfolio management, credit risk, market risk, interest rate risk, liquidity risk, fund transfer pricing, and capital allocation.
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Editorial Reviews

Characterizing banks as "risk machines," Bessis (finance, HEC School of Management, Paris) presents a risk management toolbox for quantifying, monitoring, and hopefully controlling the spectrum of risks that challenge financial institutions. In a modular approach to banking risks, regulations (applicable to internationally active banks in the G10 countries), and management processes, he discusses and graphically charts the underlying concepts and statistical and econometric models yielding risk-return profiles, plus their application. Includes an example of portfolio loss distributions, and a substantial bibliography. The author is in charge of risk analytics at a French firm. Annotation c. Book News, Inc., Portland, OR (booknews.com)
From the Publisher
"…this book is the right book to start working with Risk Management in banking…this book is worth every penny…" (MCSE Mag, 24 Janury 2003)

"…This book is the right book to start working with Risk Management in Banking…this book is worth every penny…" (www.mcsemag.eu.org, 20 March 2003)

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Product Details

  • ISBN-13: 9780470019122
  • Publisher: Wiley
  • Publication date: 2/8/2010
  • Edition number: 3
  • Pages: 840
  • Product dimensions: 6.90 (w) x 9.80 (h) x 2.00 (d)

Meet the Author

JOËL BESSIS is Professor of Finance at HEC Paris, the leading French business school, where he conducts training in risk management throughout Europe, the US, and Asia. Over the course of his career Joël has developed a dual expertise – as an academic and as a practitioner, holding permanent consulting assignments in corporations and later, in banks.

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Table of Contents

Sect. 1 Banking Risks 1
1 Banking Business Lines 3
2 Banking Risks 11
Sect. 2 Risk Regulations 23
3 Banking Regulations 25
Sect. 3 Risk Management Processes 51
4 Risk Management Processes 53
5 Risk Management Organization 67
Sect. 4 Risk Models 75
6 Risk Measures 77
7 VaR and Capital 87
8 Valuation 98
9 Risk Model Building Blocks 113
Sect. 5 Asset - Liability Management 129
10 ALM Overview 131
11 Liquidity Gaps 136
12 The Term Structure of Interest Rates 151
13 Interest Rate Gaps 164
14 Hedging and Derivatives 180
Sect. 6 Asset - Liability Management Models 191
15 Overview of ALM Models 193
16 Hedging Issues 201
17 ALM Simulations 210
18 ALM and Business Risk 224
19 ALM 'Risk and Return' Reporting and Policy 233
Sect. 7 Options and Convexity Risk in Banking 245
20 Implicit Options Risk 247
21 The Value of Implicit Options 254
Sect. 8 Mark-to-Market Management in Banking 269
22 Market Value and NPV of the Balance Sheet 271
23 NPV and Interest Rate Risk 280
24 NPV and Convexity Risks 289
25 NPV Distribution and VaR 300
Sect. 9 Funds Transfer Pricing 309
26 FTP Systems 311
27 Economic Transfer Prices 325
Sect. 10 Portfolio Analysis: Correlations 337
28 Correlations and Portfolio Effects 339
Sect. 11 Market Risk 357
29 Market Risk Building Blocks 359
30 Standalone Market Risk 363
31 Modelling Correlations and Multi-factor Models for Market Risk 384
32 Portfolio Market Risk 396
Sect. 12 Credit Risk Models 417
33 Overview of Credit Risk Models 419
Sect. 13 Credit Risk: 'Standalone Risk' 433
34 Credit Risk Drivers 435
35 Rating Systems 443
36 Credit Risk: Historical Data 451
37 Statistical and Econometric Models of Credit Risk 459
38 The Option Approach to Defaults and Migrations 479
39 Credit Risk Exposure 495
40 From Guarantees to Structures 508
41 Modelling Recoveries 521
42 Credit Risk Valuation and Credit Spreads 538
43 Standalone Credit Risk Distributions 554
Sect. 14 Credit Risk: 'Portfolio Risk' 563
44 Modelling Credit Risk Correlations 565
45 Generating Loss Distributions: Overview 580
46 Portfolio Loss Distributions: Example 586
47 Analytical Loss Distributions 595
48 Loss Distributions: Monte Carlo Simulations 608
49 Loss Distribution and Transition Matrices 622
50 Capital and Credit Risk VaR 627
Sect. 15 Capital Allocation 637
51 Capital Allocation and Risk Contributions 639
52 Marginal Risk Contributions 655
Sect. 16 Risk-adjusted Performance 667
53 Risk-adjusted Performance 669
54 Risk-adjusted Performance Implementation 679
Sect. 17 Portfolio and Capital Management (Credit Risk) 689
55 Portfolio Reporting (1) 691
56 Portfolio Reporting (2) 701
57 Portfolio Applications 714
58 Credit Derivatives: Definitions 721
59 Applications of Credit Derivatives 733
60 Securitization and Capital Management 744
Bibliography 762
Index 781
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