The Essentials of Risk Management, Second Edition / Edition 2

by Michel Crouhy, Dan Galai, Robert Mark

Overview

The definitive guide to quantifying risk vs. return—fully updated to reveal the newest, most effective innovations in financial risk management since the 2008 financial crisis

Written for risk professionals and non-risk professionals alike, this easy-to-understand guide helps you meet the increasingly insistent demand to make sophisticated assessments of companies' risk exposure. It provides the latest methods for:

• Measuring and transferring credit risk
• Increasing risk-management transparency
• Implementing an organization-wide Enterprise risk Management (ERM) approach

Michel Crouhy is head of research and development at NATIXIS and the founder and president of the NATIXIS Foundation for Quantitative Research.
Dan Galai is the Abe Gray Professor of Finance and Business Administration at the School of Business Administration, the Hebrew University in Jerusalem.
Robert Mark is the Founding Chief Executive Officer of Black Diamond Risk which provides corporate governance, risk management consulting, risk software tools, and transaction services.

Product Details

ISBN-13:	9780071818513
Publisher:	McGraw Hill LLC
Publication date:	01/10/2014
Edition description:	List
Pages:	672
Sales rank:	860,227
Product dimensions:	6.50(w) x 9.10(h) x 2.10(d)

About the Author

Dr. Michel Crouhy is Senior Vice President, Global Analytics, Market Risk Management Division at Canadian Imperial Bank of Commerce (CIBC). Prior to this he was a Professor of Finance at HEC. He has been a visiting professor at Wharton School where he received his Ph.D. He has extensively published in academic journals and is also the associate editor of the Journal of Derivatives, the Journal of Banking and Finance. He is also on the editorial board of the new Journal of Risk.

Dr. Dan Galai is the Abe Gray Professor of Finance and Business Administration at Hebrew University. He has been a visiting professor of Finance at INSEAD, and also has taught at UCLA and the University of Chicago where he received his Ph.D. He has consulted for the Chicago Board of Exchange and the American Stock Exchange. He has published numerous articles in leading business and finance journals and was the winner of the First Annual Pomeranze Prize for excellence in options research presented by the CBOE.

Table of Contents

Foreword vii

Foreword xi

Introduction to the Second Edition: Reforming Risk Management for the Post-Crisis Era xv

1 Risk Management: A Helicopter View 1

1.1 Typology of Risk Exposures 23

2 Corporate Risk Management: A Primer 45

3 Banks and Their Regulators: The Post-Crisis Regulatory Framework 67

3.1 Basel I 117

3.2 The 1996 Market Risk Amendment 125

3.3 Basel II and Minimum Capital Requirements for Credit Risk 131

3.4 Basel 2.5: Enhancements to the Basel II Framework 137

3.5 Contingent Convertible Bonds 143

4 Corporate Governance and Risk Management 151

5 A User-Friendly Guide to the Theory of Risk and Return 183

6 Interest Rate Risk and Hedging with Derivative Instruments 203

7 Measuring Market Risk: Value-at-Risk, Expected Shortfall, and Similar Metrics 233

8 Asset/Liability Management 265

9 Credit Scoring and Retail Credit Risk Management 305

10 Commercial Credit Risk and the Rating of Individual Credits 333

10.1 Definitions of Key Financial Ratios 363

11 Quantitative Approaches to Credit Portfolio Risk and Credit Modeling 365

11.1 The Basic Idea of the Reduced Form Model 407

12 The Credit Transfer Markets-and Their Implications 411

12.1 Why the Rating of CDOs by Rating Agencies Was Misleading 467

13 Counterparty Credit Risk: CVA,DVA, and FVA 471

14 Operational Risk 499

15 Model Risk 529

16 Stress Testing and Scenario Analysis 555

16.1 The 2013 Dodd-Frank Severely Adverse Scenarios 581

17 Risk Capital Attribution and Risk-Adjusted Performance Measurement 583

Epilogue: Trends in Risk Management 609

Index 619