The Risk Modeling Evaluation Handbook

By Greg N Gregoriou

Subjects: Risk management, Business, Finance, Investments & Securities, BUSINESS & ECONOMICS, Nonfiction, Investment analysis, Investments, General

Description: 0071663703The Risk Modeling Evaluation Handbook:The first in-depth analysis of inherent deficiencies in present practices!In The Risk Modeling Evaluation Handbook, an international team of experts evaluates the problematic risk-modeling methods used by large financial institutions and breaks down how these models contributed to the decline of the global capital markets. You will learn to identify the shortcomings of the most widely used risk models and gain important strategies for properly implementing these models into their investing portfolios.This comprehensive resource includes examinations of model risk as applied to:Equity and fixed income investmentsCredit and credit derivatives investments and credit processesCarry trades, rating models, and the supervisory formulaValuation models, as well as VaR, Copula, GARCH, and EVT modelsCounterparty, market, and operational risk modelsThe Risk Modeling Evaluation Handbook provides expansive explanations of the types of model risk that appear in risk measurement, risk management, and pricing, as well as market-tested techniques for mitigating risk in loan, equity, and derivative portfolios. This book will serve as the go-to guide for financial professionals looking to improve or adjust their approach to modeling financial risk.TABLE OF CONTENTSSection One: Introduction to Model RiskThe Problem of Systemic Risk as a Strong Case for the Lender of Last ResortLearning from Previous Financial Crises and the Necessity to Recognize Liquidity Shocks and the Limits of ArbitrageValuing Political RiskSection Two: Model Risk Related to Equity and Fixed Income Investments Analysts' Forecasts, Market Risk Premia, and Estimations of Expected Security ReturnsThe Market-timing Ability of Australian Superannuation FundsCaring About Stylized Features of Asset ReturnsPrice Transmissions and Market Risk in Financial MarketsVolatility Asymmetry and LeverageThe Effects of Different Parameter Estimation Methods on Option PricingEffects of Benchmark Misspecification on Risk-adjusted Performance MeasuresSection Three: Model Risk Related to Credit and Credit Derivatives InstrumentsThe Term Structure of Risk in Emerging Markets and Implications for the Carry-tradeA Strategic Management Insight into Model Risk in RatingsTranching a Securitization with the Supervisory FormulaModel Risk in the Quantitative and Qualitative Credit ProcessModel Risk in Highly Correlated Credit Portfolios of Object FinancingSection Four: Model Risk Related to Valuation ModelsConcepts to Validate Valuation ModelsModel Risk in the Context of Valuing Equity DerivativesTechniques for Mitigating Model RiskSection Five: Limitations to Measure RiskBeyond VaRVaR Computation in a Non-stationary SettingCopula-VaR and Copula-VaR-GARCH ModelingSmall-sample Properties of EVT EstimatorsSection Six: Modeling Market Risk for Risk MarketsModel Risk in Counterparty Exposure ModelingModel Risk for Credit Risk ModelingModel Risk in Credit Portfolio ModelsModel Risk for Market Risk ModelingEvaluating the Adequacy of Market Risk ModelsModel Risk Related to Operational Risk ModelsSection Seven: Economic Capital and Asset AllocationValidation of Economic Capital ModelsRobust Asset Allocation Under Model RiskThe Asset-liability Management Compound Option Model