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| Dealing with Financial Risk |
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By: Shirreff, David
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Your Price: £20.00
ISBN: 1861975910
Publisher: Profile Books
Weight: 410
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The essence of financial risk management is imagining what things might go wrong and then guarding against them. In the past 30 years a whole industry has grown up around the idea that the behaviour of financial markets can be analysed and outsmarted by mathematical models. But markets are always changing. Modern risk management can only narrow down further outcomes into bands of probabilities. It can never predict; it can only infer what might happen. Ultimately, financial firms have learned that mathematics has limited power to calculate the likelihood of the less frequent more extreme events. As regulators and forward- thinking firms get to grips with this problem, they have ventured into the more uncertain territory of designing stress-tests, imagining scenarios and occasionally playing out entire fictions of the future. Risk management at these extremes challenges the wildest imagination and the frontiers of creativity. Like mountain climbing, it is about minimising danger and taking calculated risks.
Dealing With Financial Risk is a clear and colourful guide to the peaks and crevasses of financial risk management, leading you through the theory and practice of risk-taking: from swaps and futures to credit derivatives and the implications of Basel 2, dynamic hedging, Monte Carlo simulations, chaos theory, neural networks, Raroc (risk-adjusted return on capital), stress-tests, worst-case scenarios and all kinds of games that are played in the cause of managing.
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