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Hedging Market Exposures: Identifying and Managing Market Risks Hardcover – August 2, 2011


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Product Details

  • Hardcover: 295 pages
  • Publisher: Wiley; 1 edition (August 2, 2011)
  • Language: English
  • ISBN-10: 0470535067
  • ISBN-13: 978-0470535066
  • Product Dimensions: 6.3 x 1.2 x 9.3 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (6 customer reviews)
  • Amazon Best Sellers Rank: #559,134 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

Hedging Market Exposures Identifying and Managing MarketRisks

In Hedging Market Exposures, authors and financialindustry leaders Oleg Bychuk and Brian Haughey—who throughthe Great Recession have successfully managed a complex highlyleveraged portfolio of asset-backed securities with significantequity, fixed income, credit, and other exposures—offer apractical guide to three fundamental elements of the risk controlprocess that have not previously received the attention theydeserve—identifying, quantifying, and managingmarket risks.

Providing a practical, proactive plan to help you know the risksfacing your portfolio, Hedging Market Exposures offersexpert guidance on:

  • How to select the appropriate tools to hedge various risks

  • Learning the language of quantitative finance

  • Communicating effectively with professional risk managers and"quants''

  • Asset modeling

  • Market exposures and factor sensitivities

  • Constructing a hedge

The tasks of identifying and quantifying risks and thenselecting an optimal hedge when a "perfect" one does not exist arejust as important as understanding the intricacies of exoticderivative valuation, but are usually overlooked. In-depth andstraightforward, Hedging Market Exposures reveals how to focus notmerely on quantitative measurement of risk but also on qualitativeanalysis and, crucially, on risk management.

While a manager is ultimately concerned with the risks of aportfolio as a whole, the need also exists to understand thedangers associated with the underlying portfolio constituents. Inthe end, it is the risks of these individual securities and,especially, the interplay of these risks that shape the portfolio'srisk profile. Find out how you can identify, quantify, and managemarket risks in your portfolio with the dynamic hedging strategiesfound in Hedging Market Exposures.

From the Back Cover

Praise for Hedging Market Exposures:Identifying and ManagingMarket Risks

"This timely book draws on the lessons of the recent financialcrisis to provide a comprehensive survey of the vast array of overtand, most importantly, hidden hazards that face investors andmanagers. The authors, who combine extensive industry experiencewith academic thoroughness, offer a practical guide on how toprepare for market turbulence by following the often challengingsteps of identifying, quantifying, and, most crucially, managingrisks. An indispensable read for all marketparticipants."—Frank J. Fabozzi, Professor in the Practice ofFinance, Yale School of Management, and Editor, Journal ofPortfolio Management

"An essential addition to every asset manager's library, thisbook is an apt reminder that investment management means, aboveall, managing risks. The authors make this task easier byintroducing a number of innovative techniques that extend andcomplement existing methods."—Jolanta Wysocka, CEO, MountainPacific Group, LLC

"This is a valuable resource for seasoned professionals andbeginners alike. Methodical yet accessible, it is written byauthors with broad experience in hedging various financialexposures, offering a refreshingly original perspective on handlingrisk and the role and use of hedging techniques. They guide thereader from identifying the major sources of risks in capitalmarkets to a detailed explanation of the quantitative toolsnecessary to measure those risks, to demonstrating the practicaltrade-offs of actual hands-on market exposuremanagement."—Rudi Schadt, PhD, Senior Portfolio Risk Analyst,Invesco Ltd.

"This book, by two veterans of the financial crisis, puts thereader on a fast track to understanding risk management and hedgingin modern financial markets. It presents a comprehensive catalog ofinvestment risks and a practitioner's perspective on the whys andhows of hedging those risks. The authors elucidate how theinterplay of markets, regulation, financial practice, and humanbehavior impact the hedging decision, and enliven the discussionwith examples from past risk management debacles. This is anenjoyable book and can be effective either as an introduction or asan overview."—Colm O'Cinneide, Head of PortfolioConstruction, QS Investors, LLC, New York

Customer Reviews

5.0 out of 5 stars
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It deserves reading by even the busiest finance professionals and students.
Manhattanite
Haughey and Bychuk's book is an excellent overview of risk in a volatile market where many so called "experts" misunderstand the real world of hedging risk.
New York City Professor
I learnt a lot from this text and gained a deeper understanding of subjects I thought I knew.
ABS Professional

Most Helpful Customer Reviews

3 of 3 people found the following review helpful By Manhattanite on December 25, 2011
Format: Hardcover
Dr. Bychuk and Mr. Haughey's book is unique that it explains nature and interrelationship of the components that underlie portfolio risk and seamlessly progresses to illuminate the most useful and enduring aspects of quantitative analysis and effective risk management. Their real-life treatise explains and clarifies the complex without dilution and is an invaluable asset for those looking to hedge risks, understand quantitative finance, interrelate with quants and managers, understand asset modeling and market exposures, and optimize and construct hedges. It deserves reading by even the busiest finance professionals and students.
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3 of 3 people found the following review helpful By Wall Street Denizen on September 24, 2011
Format: Hardcover Verified Purchase
As I was reading this book I could not help feeling regret that so few
volumes on capital markets are written like this one. The authors have
accomplished that rare feat of presenting sophisticated material in an
absorbing and accessible manner without cutting intellectual corners
or sacrificing rigour.

Engaging style and readability make this book invaluable for a novice,
but a seasoned veteran will also find many useful insights and
unexpected angles, even in areas of his expertise. From personal
experience, being a long-time financial professional with a background
in mathematical sciences, I was impressed by the authors' ab ovo
explanation of mathematical derivatives; the novel concept of
Equivalent Variation Investment; the guiding principle of the Risk
Management Triad; the beautifully illustrated Scenario Grid and
Synchronised Response Matrix; and the clear but rigorous elucidation
of probability convergence.

The book offers a well-rounded guide to a practitioner, from
macroeconomic and regulatory background to practical advice on model
construction to specific hedging (and, by extension, trading)
strategies. The narrative is enlivened with real-life market charts
and 'tales from the trenches'.

Perhaps the most appealing attribute of this book is its doubtless
future endurance: Dr Bychuk and Mr Haughey deal with profound issues
which will outlast any current or future economic turbulence. Whatever
your role in the financial markets and regardless of your level of
experience you will benefit from reading this book now. But you will
also find yourself revisiting it for years to come.

A worthwhile investment in one's professional future.
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4 of 5 people found the following review helpful By Morgan Downey on October 9, 2011
Format: Kindle Edition Verified Purchase
This book walks through the decision of why and how to hedge against volatile markets. It is written in an a style which is not too intimidating and although there are some formulas, one can pass these by if one needs to. The book is also a concise and efficient read. Overall, this is the book you should get if you or your firm are uncomfortable with unlimited exposure to interest rate, commodity, equity, FX or and other market value movements. It will provide you a logical framework for your decision making.
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