Value at Risk: Theory and Practice [Hardcover]

Glyn A. Holton (Author)

Book Description

ISBN-10: 0123540100 | ISBN-13: 978-0123540102 | Publication Date: March 12, 2003 | Edition: 1

Value-at-risk (VaR) is a measure of market risk that has been widely adopted since the mid-1990s for use on trading floors. This is the first advanced book published on VaR. It describes how to design, implement, and use scalable production VaR measures on actual trading floors. It takes readers from the basics of VaR to the most advanced techniques, many of which have never been published in book form.

Practical, detailed examples are drawn from markets around the world, including: Euro deposits, Pacific Basin equities, physical coffees, and North American natural gas.

Real-world challenges relating to market data, portfolio mappings, multicollinearity, and intra-horizon events are addressed in detail. Exercises reinforce concepts and walk readers step-by-step through computations.

Sophisticated techniques are fully disclosed, including: quadratic ("delta-gamma") methods for nonlinear portfolios, variance reduction (control variates and stratified sampling) for Monte Carlo VaR measures, principal component remappings, techniques to "fix" estimated covariance matrices that are not positive-definite, the Cornish-Fisher expansion, and orthogonal GARCH.

* First advanced text on Value-at-Risk
* Practical, detailed examples drawn from markets around the world
* Exercises reinforce concepts and walk readers step-by-step through computations

Editorial Reviews

Review

"Laudably balancing clarity of exposition, a unified theoretical approach, and analytical rigor, Holton has produced what is bound to become the standard advanced text and reference work on value-at-risk. Seasoned practitioners will find the treatise every bit as useful as new students to the subject."
--Christopher L. Culp, Adjunct Associate Professor of Finance, Graduate School of Business, The University of Chicago

"Glyn Holton's book is a great reference for practitioners and theorists, and an excellent textbook for students of VaR--mathematically rigorous and concise, yet lucid and accessible."
--Michael K. Ong, EVP and Chief Risk Officer, Credit Agricole Indosuez, New York, New York

From the Inside Flap

"Laudably balancing clarity of exposition, a unified theoretical approach, and analytical rigor, Holton has produced what is bound to become the standard advanced text and reference work on value-at-risk. Seasoned practitioners will find the treatise every bit as useful as new students to the subject."

Christopher L. Culp, University of Chicago

"Glyn Holton's book is a great reference for practitioners and theorists, and an excellent textbook for students of VaR—mathematically rigorous and concise, yet lucid and accessible."

Michael K. Ong, Credit Agricole Indosuez

See all Editorial Reviews

Product Details

• Hardcover: 288 pages
• Publisher: Academic Press; 1 edition (March 12, 2003)
• Language: English
• ISBN-10: 0123540100
• ISBN-13: 978-0123540102
• Product Dimensions: 9 x 6.3 x 1 inches
• Shipping Weight: 1.5 pounds
• Average Customer Review: 4.2 out of 5 stars  See all reviews (12 customer reviews)
• Amazon Best Sellers Rank: #1,522,189 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

18 of 22 people found the following review helpful:

5.0 out of 5 stars One of the most refreshing QF books to come along, March 31, 2003

By 

Reader from New York (New York City, NY) - See all my reviews

This review is from: Value at Risk: Theory and Practice (Hardcover)

This is one of the most refreshing Quantitative Finance books that have come along in the last few years. This book has been a work in process from the author for at least four or five years.

Glyn Holton's mathematical background and experience as practising risk managemer and consultant is thoroughly reflected in character of this book. The notation is consistent and logical, the mathematical/theoretical presentation is rigorous but accessible to pretty much all the intermediate/advanced undergrad students.

The emphasis is on the methodological process of building a model rather than directly presenting the final product itself. This is in contrast to most of the Value-at-Risk books on the markets which up to this point, have been written mainly by academics (University professors) rather than practitioners.

Throughout the book, Mr. Holton keeps emphasizing the duality of VaR metrics in terms of the exposure and the uncertainty of its underlying portfolio. And using the conceptual differences of these two components of risk as starting point, the relevant mathematical, probabilistic, and statistical background material are presented. For the exposure component of risk, Holton presented the mathemcatical mapping procedure; while for the uncertainty component, the conditional distribution characteristization of the risk factors are thoroughly investigated. This 'Bottom-up' analytical approach breaks down the VaR metrics into its 'atomical' parts. From there the VaR measure is methodologically built from the ground up. As result all the VaR models are presented under a uniform theoretical umbrella. This is in contrast with a 'disjointed list of VaR models' approach taken by most of the available literature up to this point. The result is a book suitable for beginners and advanced practitioners alike. Well done Glyn.

7 of 9 people found the following review helpful:

5.0 out of 5 stars The Bible, March 29, 2006

By 

sfeller "sfeller" (Cambridge) - See all my reviews

This review is from: Value at Risk: Theory and Practice (Hardcover)

I work in finance as a software developer. I had done some work with risk management and had read Jorion's book and Butler's. When I had to do my own VaR implementation, a colleague recommended Holton's book. It is amazing. The level of domain expertise is above anything else out there. It is sophisticated and well written. I thought I knew about VaR before reading Holton, but I didn't really. Now I know about VaR.

I noticed that someone has been posting negative reviews of the book here on Amazon. Those reviews are blatantly dishonest. I assume they are posted by a jealous competing author.

Holton is the bible.

9 of 12 people found the following review helpful:

5.0 out of 5 stars A great inversion, January 17, 2005

By 

Mario "mrmelchi" - See all my reviews

This review is from: Value at Risk: Theory and Practice (Hardcover)

Glyn Holton's aim was to address the book to an extend hearing. In my opinion he fulfills his objective, this by itself is a great merit. Academic, students, practitioners will find the book very useful. Further, a same person will read the book more than once, while she progresses in her knowledge and she will always find something new in it. The novel methodology bottom-up presented in the book allows to understand VaR from its foundations and gives us a map to follow in any practical implementation. The exercises displayed at the end of each section, whose results are available on internet, are enlightening. The practical examples presented refer to cases and problems that must be solved in the real world. The use of the spreadsheet to solve the most complex examples covers the gap between the theory and its practice implementation , which is not very common in this type of books. If you are interested in VaR consider the purchase of this book a great inversion.