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Quantitative Risk Management: Concepts, Techniques, and Tools (Princeton Series in Finance) [Hardcover]

by Alexander J. McNeil, Rüdiger Frey, Paul Embrechts
4.0 out of 5 stars  See all reviews (9 customer reviews)

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Book Description

October 16, 2005 0691122555 978-0691122557

The implementation of sound quantitative risk models is a vital concern for all financial institutions, and this trend has accelerated in recent years with regulatory processes such as Basel II. This book provides a comprehensive treatment of the theoretical concepts and modelling techniques of quantitative risk management and equips readers--whether financial risk analysts, actuaries, regulators, or students of quantitative finance--with practical tools to solve real-world problems. The authors cover methods for market, credit, and operational risk modelling; place standard industry approaches on a more formal footing; and describe recent developments that go beyond, and address main deficiencies of, current practice.

The book's methodology draws on diverse quantitative disciplines, from mathematical finance through statistics and econometrics to actuarial mathematics. Main concepts discussed include loss distributions, risk measures, and risk aggregation and allocation principles. A main theme is the need to satisfactorily address extreme outcomes and the dependence of key risk drivers. The techniques required derive from multivariate statistical analysis, financial time series modelling, copulas, and extreme value theory. A more technical chapter addresses credit derivatives. Based on courses taught to masters students and professionals, this book is a unique and fundamental reference that is set to become a standard in the field.

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Quantitative Risk Management: Concepts, Techniques, and Tools (Princeton Series in Finance) + Financial Risk Forecasting: The Theory and Practice of Forecasting Market Risk with Implementation in R and Matlab + Risk Management and Financial Institutions, + Web Site
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Editorial Reviews


One of the Top 10 Technical Books on Financial Engineering by Financial Engineering News for 2006

"Quantitative Risk Managment can be highly recommended to anyone looking for an excellent survey of the most important techniques and tools used in this rapidly growing field."--Holger Drees, Risk

"This book provides a state-of-the-art discussion of the three main categories of risk in financial markets, market risk, . . . credit risk . . . and operational risk. . . . This is a high level, but well-written treatment, rigorous (sometimes succinct), complete with theorems and proofs."--D.L. McLeish, Short Book Reviews of the International Statistical Institute

"Quantitative Risk Management is highly recommended for financial regulators. The statistical and mathematical tools facilitate a better understanding of the strengths and weaknesses of a useful range of advanced risk-management concepts and models, while the focus on aggregate risk enhances the publication's value to banking and insurance supervisors."--Hans Blommestein, The Financial Regulator

"A great summary of the latest techniques available within quantitative risk measurement. . . . [I]t is an excellent text to have on the shelf as a reference when your day job covers the whole spectrum of quantitative techniques in risk management."--
Financial Engineering News

"Alexander McNeil, Rudiger Frey and Paul Embrechts have written a beautiful book. . . . [T]here is no book that can provide the type of rigorous, detailed, well balanced and relevant coverage of quantitative risk management topics that Quantitative Risk Management: Concepts, Techniques, and Tools offers. . . . I believe that this work may become the book on quantitative risk management. . . . [N]o book that I know of can provide better guidance."--Dr. Riccardo Rebonato, Global Association of Risk Professionals (GARP) Review

"This is a very impressive book on a rapidly growing field. It certainly helps to discover the forest in an area where a lot of trees are popping up daily."--Hans Bhlmann, SIAM Review

From the Inside Flap

"This book is a compendium of the statistical arrows that should be in any quantitative risk manager's quiver. It includes extensive discussion of dynamic volatility models, extreme value theory, copulas, and credit risk. Academics, Ph.D. students, and quantitative practitioners will find many new and useful results in this important volume."--Robert F. Engle III, 2003 Nobel Laureate in Economic Sciences, Michael Armellino Professor in the Management of Financial Services at New York University's Stern School of Business

"This book provides a framework and a useful toolkit for analysis a wide variety of risk management problems. Common pitfalls are pointed out, and mathematical sophistication is used in pursuit of useful and usable solutions. Every financial institution has a risk management department that looks at aggregated portfolio-wide risks on longer time scales, and at risk exposure to large, or extreme, market movements. Risk managers are always on the lookout for good techniques to help them do their jobs. This very good book provides these techniques and addresses an important, and under-developed, area of practical research."--Martin Baxter, Nomura International

"McNeil, Frey, and Embrechts present a wide-ranging yet remarkably clear and coherent introduction to the modelling of financial risk. Unlike most finance texts, where the focus is on pricing individual instruments, the primary focus in this book is the statistical behavior of portfolios of risky instruments, which is, after all, the primary concern of risk management. This ought to be a core text in every risk manager's training, and a useful reference for experienced professionals."--Michael Gordy

"There is no book that provides the type of rigorous and detailed coverage of risk management topics that this book does. This could become the book on quantitative risk management."--Riccardo Rebonato, Royal Bank of Scotland, author of Modern Pricing of Interest-Rate Derivatives

Product Details

  • Series: Princeton Series in Finance
  • Hardcover: 538 pages
  • Publisher: Princeton University Press (October 16, 2005)
  • Language: English
  • ISBN-10: 0691122555
  • ISBN-13: 978-0691122557
  • Product Dimensions: 9.5 x 6.5 x 1.3 inches
  • Shipping Weight: 2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (9 customer reviews)
  • Amazon Best Sellers Rank: #267,696 in Books (See Top 100 in Books)

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22 of 22 people found the following review helpful
4.0 out of 5 stars Software implementation available for S-Plus and R July 24, 2007
Format:Hardcover|Verified Purchase
Although not obvious, there is software available to implement the functionality described mathematically in the book. Alexander McNeil provides S-Plus code on his personal website, and there is an R port of that code on CRAN called QRMlib. Most of the provided software is on fitting fat-tailed distributions. This is all very useful in practice, if you care to be statistically precise. Unfortunately, many practitioners would clearly prefer rules of thumb to quantitative methods only usable with statistical software that doesn't run in Excel. Excellent theoretical text with solid backing software.
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77 of 93 people found the following review helpful
2.0 out of 5 stars QUANTITATIVE risk management January 19, 2006
If you want to read a book on risk management, this may be not the book to read. This book is interesting as an applied math book for say some application in risk management but not as a risk management book. The main application of this book is credit risk. What does the reader learn ? Nothing about how to compute the spread of a CDO's tranche, nothing about how to manage correlation risk, nothing about how to manage spread risk, nothing about the real value of the calibrated intensity and nothing about the real value of the spreads. Needless to say, you will learn nothing about the new indices such as i-traxx for calibration. As a risk management book, it is a rather poor book. However, you will learn many things on time series, stochastic intensity models, copula and so on. In fact, the right title is "Mathematical and Statistical methods for risk management in view". Bearing in mind that this is an applied math book, it is well written and contains a lot of material that can be interesting. As a consequence, this book is rated with 1 star as a risk management book but with 4 stars as an applied math book.
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9 of 9 people found the following review helpful
5.0 out of 5 stars Power tools October 22, 2007
Format:Hardcover|Verified Purchase
I'd add the word power in front of tools in the book title! Yes the book doesn't give you any step-by-step how to of doing any of the things like some have complained. Then again, it's not meant to be a how-to book. This is a "why" book and the authors explain the whys brilliantly. Even the chapters covering statistical background materials, the authors chose the exact level of details for coverage without wasting any pages. To appreciate the book, the reader does need a strong math background. Then every page of the book is worth it.
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7 of 7 people found the following review helpful
5.0 out of 5 stars Excellent for statisticians August 2, 2007
Format:Hardcover|Verified Purchase
This book is more like Mathematical Statistics for Risk Management. It covers some reviews of standard mathematical stat and some advanced and latest materials as well as applications in risk management. But as some other reviewers already mentioned, the focus is on the statistics and probability for risk management rather than the business context. And it is written in a rather formal theorem-proof format which, to some extent, could have been simplified for other audiences. It is excellent for someone with heavy stat background such as MS/PhD in statistics or PhD in Finance.

Another book that is a bit easier to read that covers Stat and Finance well with business context is: Statistics and Finance: An Introduction, which includes more than financial risk management.
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6 of 6 people found the following review helpful
3.0 out of 5 stars Good for academia, bad for practice June 8, 2007
This is a typical theoretical book. With all pros and cons around that statement. As a mathematician I found it well written in terms of math introduction to the subject. BUT I would never recommend that book for the practical learning. It is SO FAR away from the practical quants everyday job, that one would never use that book. 3 stars= 5/2(theory)+1/2(practice)
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