Understanding Risk

This book explains how to understand financial risk and how the severity and frequency of losses can be controlled.  Divided into four parts, it begins by introducing the basics of risk management and the behavior of financial instruments. The next section focuses on regulatory capital standards and models, addressing value-at-risk (VaR) models, portfolio credit risk, tranching, operational risk, and the Basel accords. The author then deals with asset/liability management (ALM) and liquidity management. The last part explores structured finance and a variety of new trading instruments, including inflation-linked products, sophisticated equity basket options, and convertible bonds.

Introduction. Risk Management and the Behavior of Products. Economic and Regulatory Capital Models. Treasury and Liquidity Risks. Some Trading Businesses and Their Challenges. Concluding Remarks. Index.