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Market Risk Analysis, Value at Risk Models (Volume IV) Hardcover – February 9, 2009

ISBN-13: 978-0470997888 ISBN-10: 9780470997888 Edition: Volume IV

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Market Risk Analysis, Value at Risk Models (Volume IV) + Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments (Volume III) + Market Risk Analysis, Practical Financial Econometrics (Volume II)
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Product Details

  • Hardcover: 492 pages
  • Publisher: Wiley; Volume IV edition (February 9, 2009)
  • Language: English
  • ISBN-10: 9780470997888
  • ISBN-13: 978-0470997888
  • ASIN: 0470997885
  • Product Dimensions: 9.8 x 6.9 x 1.3 inches
  • Shipping Weight: 2.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Best Sellers Rank: #676,016 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

Market Risk Analysis is a series of four volumes:

Volume I: Quantitative Methods in Finance

Volume II: Practical Financial Econometrics

Volume III: Pricing, Hedging and Trading Financial Instruments

Volume IV: Value at Risk Models.

Although the four volumes are very much interlinked, each containing numerous cross-references to other volumes, they are written as self-contained texts.

Volume I covers the essential mathematical and financial background for subsequent volumes. There are six comprehensive chapters covering all the calculus, linear algebra, probability and statistics, numerical methods and portfolio mathematics that are necessary for market risk analysis. It is a complete and pedagogical introduction to quantitative methods applied to finance.

Volume II provides a detailed understanding of financial econometrics, with a unique focus on applications to asset pricing, fund management and market risk analysis. It covers equity factor models, including a detailed analysis of the Barra model and tracking error, principal component analysis, volatility and correlation, GARCH, cointegration, copulas, Markov switching, quantile regression, discrete choice models, non-linear regression, forecasting and model evaluation.

Volume III has five extensive chapters on the pricing, hedging and trading of bonds and swaps, futures and forwards, options and volatility, and detailed descriptions of mapping portfolios of these financial instruments to their risk factors. There are numerous examples, all coded in interactive Excel spreadsheets, including many pricing formulae for exotic options but excluding the calibration of stochastic volatility models, for which Matlab code is provided.

Volume IV builds on the three previous volumes to provide a comprehensive and detailed treatment of market VaR models. The exposition starts at an elementary level but, as in all the other volumes, the pedagogical approach accompanied by numerous interactive Excel spreadsheets allows readers to experience the application of parametric linear, historical simulation and Monte Carlo VaR models to increasingly complex portfolios. Starting with simple positions, readers are soon applying risk models to large international securities portfolios, commodity futures, path dependent options and much else. This rigorous treatment includes many new results and applications to regulatory and economic capital allocation, measurement of VaR model risk and stress testing.

Each volume is accompanied by a CD-ROM which features numerous interactive Excel spreadsheets that illustrate the vast majority of the problems and case studies in these texts. For further information see the accompanying CD-ROM

From the Back Cover

Written by leading market risk academic, Professor Carol Alexander, Value-at-Risk Models forms part four of the Market Risk Analysis four volume set. Building on the three previous volumes this book provides by far the most comprehensive, rigorous and detailed treatment of market VaR models. It rests on the basic knowledge of financial mathematics and statistics gained from Volume I, of factor models, principal component analysis, statistical models of volatility and correlation and copulas from Volume II and, from Volume III, knowledge of pricing and hedging financial instruments and of mapping portfolios of similar instruments to risk factors. A unifying characteristic of the series is the pedagogical approach to practical examples that are relevant to market risk analysis in practice.

All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include:

  • Parametric linear value at risk (VaR)models: normal, Student tand normal mixture and their expected tail loss (ETL);
  • New formulae for VaR based on autocorrelated returns;
  • Historical simulation VaR models: how to scale historical VaR and volatility adjusted historical VaR;
  • Monte Carlo simulation VaR models based on multivariate normal and Student t distributions, and based on copulas;
  • Examples and case studies of numerous applications to interest rate sensitive, equity, commodity and international portfolios;
  • Decomposition of systematic VaR of large portfolios into standard alone and marginal VaR components;
  • Backtesting and the assessment of risk model risk;
  • Hypothetical factor push and historical stress tests, and stress testing based on VaR and ETL.

Customer Reviews

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Most Helpful Customer Reviews

2 of 2 people found the following review helpful By Sustainability First on February 19, 2013
Format: Hardcover Verified Purchase
There is a tremendous amount of risk-related experience embedded in this series, I was particularly interested in VaR and have found it provides a lot of good insights into how to construct VaR models. What to avoid, what to add in to improve them. Stress and scenarios was treated quite quickly. Another chapter (perhaps another book!) on how to use such models would be appropriate. And then there are the regulatory requirements like Basel III and Solvency II, also another book.
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2 of 2 people found the following review helpful By Aleksander B. Hansen on November 4, 2012
Format: Hardcover
If you are thinking about getting a book on market risk analysis, that covers volatility modeling such as EWMA and GARCH, as well as the popular Value-at-Risk methods, then this is the book for you. Jorion's Value-at-Risk is very similar to this volume, however, Jorion's book is a bit dated and does not come with any spreadsheets. Carol Alexander's 4-volume series is excellent. You can read each book by itself, or all 4 volumes back-to-back. If you have a weak quantitative background, then you may find that volume 1 will serve as a good complement to volume 4.
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5 of 7 people found the following review helpful By Alfred Wu on April 10, 2010
Format: Hardcover Verified Purchase
Because of Carol's Market Risk Analysis III, I found that risk management is a systematic course. And it encourage me to study
this field. This series has four textbooks. It has complete and thorough description in the market risk. It is systematic and
introduce market risk with complete concepts step by step. If you are interesting in market risk, it would be a excellent choice
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By Nikolaos Zikas on June 24, 2014
Format: Hardcover Verified Purchase
As I am interested in the topic, I am naturally biased in favor of authors like C. Alexander who provide lots of info and explanation regarding teh VaR systems. The examples on Excel are invaluable and most of the writing is quite clear and straightforward. I ve bought the whole series as I really like her style. A little more stuff about extreme value theory would be welcome but still I found it a very good book.

ps waiting for some new books Carol!!
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0 of 1 people found the following review helpful By S. Matthews on February 21, 2013
Format: Hardcover
Most of this appears to be a reasonable operational description of the world of value at risk modelling ('this is how it is done'). However the discussion of Bayesian reasoning is so bizarre and garbled that it falls into the category of 'not even wrong'. It leaves me wondering how text like this could even take place, and it means that I would treat any conceptual, as opposed to operational, discussion in the rest of the book with extreme care.
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