Risk Management in Banking / Edition 3

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“Highly recommended to professionals, risk managers and students in risk management who look for a relevant comprehensive view of how risk management expands and evolves towards greater sophistication.”

Alain Canac, former Senior Credit Officer at Banque Paribas and IXIS Corporate & Investment Bank

The recent global financial crisis has highlighted the need for all participants in the banking system to understand and intelligently utilize risk management. Updated and expanded, the new edition of Bessis’s Risk Management in Banking is the best overall guide to the concepts and tools needed to avoid the next banking crisis. Bessis reveals his roots as both academic and practitioner by his combination of intellectual rigor and pragmatic application. Concisely integrating a wide body of work within a comprehensive analytic framework, the careful exposition as well as practical illustrations will be appreciated by students and bankers alike. Highly recommended!

Stephen Kealhofer, Managing Principal, Research at Diversified Credit Investments

“Risk Management in Banking has been a constant companion in my work. Over my career I have developed three different corporate risk management programs and have found Dr. Bessis’ writing to be highly valuable and especially practical. This updated edition expands greatly on previous volumes and benefits from recent international experiences which have greatly challenged some approaches to the understanding of risk. It is essential reading for those managing risks in today’s complex banking environment.

David R. Koenig, Chief Executive Officer, The Governance Fund, LLC and Past Chair, Board of Directors, Professional Risk Managers’ International Association (PRMIA)

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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: 9780470019139
  • Publisher: Wiley
  • Publication date: 2/8/2010
  • Edition description: New Edition
  • Edition number: 3
  • Pages: 840
  • Product dimensions: 6.60 (w) x 9.50 (h) x 1.80 (d)

Meet the Author

Joël Bessis (Paris, France) graduated as an Engineer from Ecole Centrale in Paris, earned a Master in Business Administration at Columbia University in New York, and received a Ph. D. in Finance at the University of Paris Dauphine. Since 1980, he has been working as a Professor of Finance at Group HEC, the leading French business school. As an academic, Joel Bessis published various papers and books in the fields of corporate finance, industrial economics, and financial markets. He is a frequent speaker at professional conferences. Joel Bessis developed a dual expertise, as an academic and as a practitioner, holding permanent consulting assignments in corporations and, later, in banks. Joel Bessis worked over 15 years in this area for financial institutions. Joel Bessis has acquired experience in bank wide risk management in many well-known financial institutions. He has been a consultant to risk departments of several banking institutions in Europe. He held a permanent consultancy position for 7 years at Banque Paribas in the Risk Department and for two years at the European Bank for Development (EIB). On leave of absence from HEC Paris from 2000, he was Director of Research at FitchRatings in 2000–2001, Head of Validation at the Risk Department of Ixis, a Paris-based Investment Bank, and held the same position at “Groupe Caisse d’Epargne”, one the major French banks, until 2006. He is now Professor at HEC Paris and maintains consultancy assignments in Banks. He conducts executive training in risk management in Eastern Europe, US and Asia.

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Table of Contents

About the Author.


Section 1: The Financial Crisis.

1 The 2007-2008 Financial Crisis.

Section 2: Business Lines, Risks, and Risk Management.

2 banking Business Lines.

2 Risks and Risk Management.

4 Risk Management.

Section 3: Financial Products.

5 Banking and Financial Products.

6 Essentials on Derivative Products.

7 Interest Rate Risk and Interest Rate Derivatives.

8 Foreign Exchange Risk and Foreign Exchange Derivatives.

9 Credit Derivatives.

Section 4: Valuation.

10 Distribution Functions.

11 Discrete and Continuous Returns.

12 Stochastic Processes.

13 Valuation and Pricing Risk.

14 Some Applications of Valuation Techniques.

Section 5: Risk Modeling.

15 Sensitivity.

16 Volatility.

17 The Value-at-Risk Measure.

18 VaR and Capital.

Section 6: Regulations.

19 Banking Regulations: Basel 1 and Market Risk.

20 Banking Regulations: The Basel 2 Accord.

21 Accounting Standards.

Section 7: Asset Liability Management (ALM).

22 Liquidity Management and Liquidity Gaps.

23 Interest Rate Gaps.

24 ALM and Hedging Policies.

25 Implicit Options Risk.

26 Economic Value of the Balance Sheet.

27 Economic Value and Convexity Risk.

Section 8: Funds Transfer Pricing Systems.

28 Funds Transfer Pricing Systems.

29 Economic Transfer Prices.

Section 9: Dependencies and Portfolio Risk.

30 Correlations and Covariances.

31 Conditional Probabilities.

32 Factor Models.

33 Dependencies and Copula Functions.

34 Simulations with Factor Models or the Copula Approach.

Section 10: Market Risk.

35 Delta-normal VaR.

36 Historical and Hypothetical Simulations.

37 Simulation of Interest Rates.

38 Back Tests, Benchmarks and Stress Tests.

Section 11: Credit Risk: Standalone.

39 Credit Risk Data.

40 Rating Systems.

41 Statistical and Scoring Models.

42 The Option Approach to Defaults and Migrations.

43 Default Probability and Default Intensity.

44 Credit Risk Potential Exposure.

45 Modeling Recoveries.

46 Credit Risk Valuation and Credit Spreads.

Section 12: Credit Portfolio Risk.

47 Credit Event Dependencies.

48 Example of Portfolio Loss Distribution.

49 Analytical Loss Distributions.

50 Simulation of Credit Portfolio Loss Distributions.

51 Credit Portfolio Models.

Section 13: Capital Allocation.

52 Economic Capital and Credit Risk VaR.

53 Capital Allocation and Risk Contributions.

54 Marginal Risk Contributions.

Section 14: Risk-adjusted Performance.

55 RaRoC and Shareholders' Value Added.

56 Economic Income Statements.

Section 15: Credit Portfolio Management.

57 Portfolio Analysis.

58 Securitization and Capital Management.

59 Credit Portfolio Management.

Section 16: Conclusion and Financial Reforms.

60 The Financial System and Reforms.



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