Customer Reviews

Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk (with CD-ROM)

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This is a must buy book for both kinds of people: students or people in academia and practitioners who want to understand different type of risk they face at a macro or micro level. The reasons I like this book on risk management better than thousand others already out there are following. I like to describe this book as having two sections, both the sections are very important and people can focus on either depending on what they are looking for. The first part of the book provides a very good understanding of the risks faced by managers, for example risk managers, head of a trading portolfio or a desk or even CEOs. Very often these people face risk which are hard to quantify or even understand and are not often talked about. The author draws from personal experience and provides interesting case studies,. which makes this part of the book a pleasure to read. I learnt about model risk, reputation risk and other such risks which typically a junior person on a trading desk is not exposed to. So this understanding is very valuable in order to communicate with your boss or to get more insights about risks that management may care about.
The Second part of the book focusses on risk management of different type of instruments, instruments range from plain vanilla to complex path dependent options. It spans through assets classes as well. As promised by the author, the level of mathematical and quantitative background required is kept to the minimum. The text provides intuition about what market variables or market moves a specific instruments depends on rather than complex formulae to price such instruments. For somebody like me, who has a little more mathematical background than an average reader, the text points to latest research or specific papers that I can explore if I want to flex my quantitative muscle.
The book is full of very interesting exercises and case studies, which are truly practical. This is something which is completely different from many texts that I have seen on this topic.
Overall, I highly recommend this book to anybody who has anything to do with trading financial instruments.

Allen delivers the most insightful look at market risk management for dealers since the Group of 30 Report. While other books are taking on an increasingly bureaucratic tone when it comes to risk management, Allen is refreshingly proactive. I really like the treatment of valuation reserves. His discussion of managing spot, forward and options risks bridges the gap between what a trader is thinking and what a risk manager should be thinking. This isn't a book for the sort of risk manager who hasn't been on the trading floor in a few months. It is a tactical book for the pro who works shoulder to shoulder with quants, traders and salespeople. Note that the book is qualitative. For the quantitative side of all this, see Holton's landmark "Value-at-Risk".

Allen's book is absolutely phenomenal. Most of the risk management books out there are too technical to be of any practical use. Allen truly focuses on the practice of risk management and gives us insights on how to be a truly good risk manager. Traders could benefit from his insights as well. I particularly liked his breakdown of linear vs. non-linear risks, and liquid vs. non-liquid positions. In terms of the practical risk management of options (vanilla and exotics) I haven't seen anything this clear and this comprehensive. The accompanying CD is an absolute blessing in order to fully understand the concepts like price vol matrices, etc. This should be a required additional reading for all students in financial mathematics/MBA programs around the world! Well Done Mr. Allen!!