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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''
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.
"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
It deserves reading by even the busiest finance professionals and students.
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.
I learnt a lot from this text and gained a deeper understanding of subjects I thought I knew.
When I started reading this book I was surprised that I actually was able to read past the first chapter without meandering into complete theoretical areas that as a professional... Read morePublished 13 months ago by TraderJay
This is a book I've been waiting for. At last a lucid, intelligent exposition of risks lurking in structured products and other instruments, seamlessly combining an exposition of... Read morePublished on September 24, 2011 by ABS Professional