Part 1: Financial Institutions and Their Trading 23
Chapter 2 Banks 25
Chapter 3 Insurance Companies and Pension Plans 47
Chapter 4 Mutual Funds, ETFs, and Hedge Funds 75
Chapter 5 Trading in Financial Markets 97
Chapter 6 The Credit Crisis of 2007-2008 127
Chapter 7 Valuation and Scenario Analysis: The Risk-Neutral and Real Worlds 145
Part 2: Market Risk 159
Chapter 8 How Traders Manage Their Risks 161
Chapter 9 Interest Rate Risk 185
Chapter 10 Volatility 213
Chapter 11 Correlations and Copulas 243
Chapter 12 Value at Risk and Expected Shortfall 269
Chapter 13 Historical Simulation and Extreme Value Theory 293
Chapter 14 Model-Building Approach 317
Part 3: Regulation 345
Chapter 15 Basel I, Basel II, and Solvency II 347
Chapter 16 Basel II.5, Basel III, and Other Post-Crisis Changes 377
Chapter 17 Regulation of the OTC Derivatives Market 399
Chapter 18 Fundamental Review of the Trading Book 415
Part 4: Credit Risk 429
Chapter 19 Estimating Default Probabilities 431
Chapter 20 CVA and DVA 459
Chapter 21 Credit Value at Risk 479
Part 5: Other Topics 495
Chapter 22 Scenario Analysis and Stress Testing 497
Chapter 23 Operational Risk 515
Chapter 24 Liquidity Risk 537
Chapter 25 Model Risk Management 565
Chapter 26 Economic Capital and RAROC 585
Chapter 27 Enterprise Risk Management 603
Chapter 28 Financial Innovation 621
Chapter 29 Risk Management Mistakes to Avoid 643
Part 6: Appendices 655
Appendix A Compounding Frequencies for Interest Rates 657
Appendix B Zero Rates, Forward Rates, and Zero-Coupon Yield Curves 661
Appendix C Valuing Forward and Futures Contracts 667
Appendix D Valuing Swaps 669
Appendix E Valuing European Options 673
Appendix F Valuing American Options 677
Appendix G Taylor Series Expansions 681
Appendix H Eigenvectors and Eigenvalues 685
Appendix I Principal Components Analysis 689
Appendix J Manipulation of Credit Transition Matrices 691
Appendix K Valuation of Credit Default Swaps 693
Appendix L Synthetic CDOs and Their Valuation 697
Answers to Questions and Problems 701
Glossary 745
RMFI Software 773
Table for N(x) When x >= 0 777
Table for N(x) When x <= 0 779
Index 781
The most complete, up-to-date guide to risk management in finance
Risk Management and Financial Institutions, Fifth Edition explains all aspects of financial risk and financial institution regulation, helping you better understand the financial markets--and their potential dangers. Inside, you'll learn the different types of risk, how and where they appear in different types of institutions, and how the regulatory structure of each institution affects risk management practices. Comprehensive ancillary materials include software, practice questions, and all necessary teaching supplements, facilitating more complete understanding and providing an ultimate learning resource.
All financial professionals need to understand and quantify the risks associated with their decisions. This book provides a complete guide to risk management with the most up to date information.
Understand how risk affects different types of financial institutions
Learn the different types of risk and how they are managed
Study the most current regulatory issues that deal with risk
Get the help you need, whether you're a student or a professional
Risk management has become increasingly important in recent years and a deep understanding is essential for anyone working in the finance industry; today, risk management is part of everyone's job. For complete information and comprehensive coverage of the latest industry issues and practices, Risk Management and Financial Institutions, Fifth Edition is an informative, authoritative guide.
JOHN C. HULL is the Maple Financial Professor of Derivatives and Risk Management at the Joseph L. Rotman School of Management, University of Toronto, and codirector of Rotman's Master of Finance and Master of Financial Risk Management programs. He has been a consultant to many North American, Japanese, and European financial institutions.
