Risk Management and Financial Institutions
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Risk Management and Financial Institutions

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The most complete, up to date guide to risk management in finance
Risk Management and Financial Institutions explains all aspects of financial risk and financial institution regulation, helping readers better understand the financial markets and potential dangers. This new fourth edition has been updated to reflect the major developments in the industry, including the finalization of Basel III, the fundamental review of the trading book, SEFs, CCPs, and the new rules affecting derivatives markets. There are new chapters on enterprise risk management and scenario analysis. Readers 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 a thorough background in risk and the interlacing connections between financial institutions to better understand the market, defend against systemic dangers, and perform their jobs. This book provides a complete picture of the risk management industry and practice, 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


Risk management is paramount with the dangers inherent in the financial system, 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 is an informative, authoritative guide.
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Product details

  • Paperback | 752 pages
  • 177.8 x 251.46 x 53.34mm | 1,279.12g
  • New York, United States
  • English
  • 4th Edition
  • 1118955943
  • 9781118955949
  • 150,359

Back cover copy

All Finance Professionals Need to Understand Risk

Companies must take risks to survive and prosper, but deciding which risks are acceptable, which are not, and what action to take is the tricky part. To be successful, all finance professionals need a solid understanding of risk.

Risk Management and Financial Institutions, written by one of the most respected authorities on financial risk management, is thorough, textbook-level instruction for all finance professionals, on all aspects of financial risk.

Fully revised and updated, this top-selling book clarifies such complex topics as the diff erent types of financial institutions and how they are regulated, valuation and scenario analysis, credit risk, margin and collateral, volatility, and much more.

You'll find new coverage of timely subjects, such as central clearing, scenario analysis, enterprise risk management, and the latest regulatory issues--and gain access to a supplementary website with additional software and helpful learning aids.
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Table of contents

Business Snapshots xxi


Preface xxiii


Chapter 1: Introduction 1


PART ONE : FINANCIAL INSTITUTIONS AND THEIR TRADING


Chapter 2: Banks 25


Chapter 3: Insurance Companies and Pension Plans 45


Chapter 4: Mutual Funds and Hedge Funds 71


Chapter 5: Trading in Financial Markets 93


Chapter 6: The Credit Crisis of 2007 121


Chapter 7: Valuation and Scenario Analysis: The Risk-Neutral and Real Worlds 137


PART TWO : MARKET RISK


Chapter 8: How Traders Manage Their Risks 153


Chapter 9: Interest Rate Risk 175


Chapter 10: Volatility 201


Chapter 11: Correlations and Copulas 231


Chapter 12: Value at Risk and Expected Shortfall 255


Chapter 13: Historical Simulation and Extreme Value Theory 277


Chapter 14: Model-Building Approach 299


PART THREE : REGULATION


Chapter 15: Basel I, Basel II, and Solvency II 325


Chapter 16: Basel II.5, Basel III, and Other Post-Crisis Changes 353


Chapter 17: Fundamental Review of the Trading Book 373


PART FOUR : CREDIT RISK


Chapter 18: Managing Credit Risk: Margin, OTC Markets, and CCPs 383


Chapter 19: Estimating Default Probabilities 401


Chapter 20: CVA and DVA 429


Chapter 21: Credit Value at Risk 447


PART FIVE : OTHER TOPICS


Chapter 22: Scenario Analysis and Stress Testing 463


Chapter 23: Operational Risk 481


Chapter 24: Liquidity Risk 501


Chapter 25: Model Risk 527


Chapter 26: Economic Capital and RAROC 547


Chapter 27: Enterprise Risk Management 565


Chapter 28: Risk Management Mistakes to Avoid 579


PART SIX : APPENDICES


Appendices 591


Answers to Questions and Problems 629


Glossary 669


DerivaGem Software 689


Tables for N(x) 695


Index 699
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About John C. Hull

JOHN C. HULLis 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 program. He has been a consultant to many North American, Japanese, and European fi nancial institutions, and is the author of three books, which are widely used by both practitioners and academics, and an associate editor of eight academic journals.
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Rating details

87 ratings
4.03 out of 5 stars
5 36% (31)
4 38% (33)
3 22% (19)
2 3% (3)
1 1% (1)
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