Risk Management and Financial Institutions

ISBN-10: 1118269039

ISBN-13: 9781118269039

Edition: 3rd 2012

Authors: John C. Hull
List price: $65.00 Buy it from $25.03
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Description: Third edition will include four new chapters as well as significant revision with a focus more on financial institutions.  New key topics are Basel III, Credit VaR, Model Risk, expansions on Counterparty Credit Risk, Regulation and Solvency, + new ancillaries.  End of chapter questions are divided into “Practice Questions and Problems” and “Further Questions.” The answers to Practice Questions and Problems are currently at the end of the book. The supplementary material will be the same as for the second edition, including  Answers to Further Questions and Instructor Notes; Spreadsheets for Further Questions; Suggested Course Outline (also on my web site); PowerPoint slides (also on my web site).

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Book details

List price: $65.00
Edition: 3rd
Copyright year: 2012
Publisher: John Wiley & Sons, Limited
Publication date: 5/22/2012
Binding: Paperback
Pages: 672
Size: 7.02" wide x 10.00" long x 1.80" tall
Weight: 2.376
Language: English

John C. Hull is the noted author of such texts as Introduction to Futures and Options, Markets and Options, Futures, and Other Derivatives. In these books, and others, he explains in readable form concepts related to the Futures market, investing, and business. Largely aimed at students, Hull's books serve as an excellent introduction to the field or a valuable refresher to those already in the corporate world. John C. Hull has been a professor of finance and director of the Centre for Finance Studies at the University of Toronto in Canada. He received degrees from Cranfield University, Cambridge University, and Lancaster.

Business Snapshots
Preface
Introduction
Risk vs. Return for Investors
The Efficient Frontier
The Capital Asset Pricing Model
Arbitrage Pricing Theory
Risk vs. Return for Companies
Risk Management by Financial Institutions
Credit Ratings
Summary
Further Reading
Practice Questions and Problems
Further Questions
Banks
Commercial Banking
The Capital Requirements of a Small Commercial Bank
Deposit Insurance
Investment Banking
Securities Trading
Potential Conflicts of Interest in Banking
Today’s Large Banks
The Risks Facing Banks
Summary
Further Reading
Practice Questions and Problems
Further Questions
Insurance Companies and Pension Plans
Life Insurance
Annuity Contracts
Mortality Tables
Longevity and Mortality Risk
Property-Casualty Insurance
Health Insurance
Moral Hazard and Adverse Selection
Reinsurance
Capital Requirements
The Risks Facing Insurance Companies
Regulation
Pension Plans
Summary
Further Reading
Practice Questions and Problems
Further Questions
Mutual Funds and Hedge Funds
Mutual Funds
Hedge Funds
Hedge Fund Strategies
Hedge Fund Performance
Summary
Further Reading
Practice Questions and Problems
Further Questions
Trading in Financial Markets
The Markets
Long and Short Positions in Assets
Derivatives Markets
Plain Vanilla Derivatives
Clearing Houses
Margin
Non-Traditional Derivatives
Exotic Options and Structured Products
Risk Management Challenges
Summary
Further Reading
Practice Questions and Problems
Further Questions
The Credit Crisis of 2007
The U.S. Housing Market
Securitization
The Crisis
What Went Wrong?
Lessons from the Crisis
Summary
Further Reading
Practice Questions and Problems
Further Questions
How Traders Manage Their Risks
Delta
Gamma
Vega
Theta
Rho
Calculating Greek Letters
Taylor Series Expansions
The Realities of Hedging
Hedging Exotic Options
Scenario Analysis
Summary
Further Reading
Practice Questions and Problems
Further Questions
Interest Rate Risk
The Management of Net Interest Income
LIBOR and Swap Rates
Duration
Convexity
Generalization
Nonparallel Yield Curve Shifts
Interest Rate Deltas in Practice
Principal Components Analysis
Gamma and Vega
Summary
Further Reading
Practice Questions and Problems
Further Questions
Value at Risk
Definition of VaR
Examples of the Calculation of VaR
VaR vs. Expected Shortfall
VaR and Capital
Coherent Risk Measures
Choice of Parameters for VaR
Marginal VaR, Incremental VaR, and Component VaR
Euler’s Theorem
Aggregating VaRs
Back-Testing
Summary
Further Reading
Practice Questions and Problems
Further Questions
Volatility
Definition of Volatility
Implied Volatilities
Are Daily Percentage Changes in Financial
Variables Normal?
The Power Law
Monitoring Daily Volatility
The Exponentially Weighted Moving Average Model
The GARCH(1,1) Model
Choosing Between the Models
Maximum Likelihood Methods
Using GARCH(1,1) to Forecast Future Volatility
Summary
Further Reading
Practice Questions and Problems
Further Questions
Correlations and Copulas
Definition of Correlation
Monitoring Correlation
Multivariate Normal Distributions
Copulas
Application to Loan Portfolios: Vasicek’s Model
Summary
Further Reading
Practice Questions and Problems
Further Questions
Basel I, Basel II, and Solvency II
The Reasons for Regulating Banks
Bank Regulation Pre-1988
The 1988 BIS Accord
The G-30 Policy Recommendations
Netting
The 1996 Amendment
Basel II
Credit Risk Capital Under Basel II
Operational Risk Capital Under Basel II
Pillar 2: Supervisory Review
Pillar 3: Market Discipline
Solvency II
Summary
Further Reading
Practice Questions and Problems
Further Questions
Basel 2.5, Basel III, and Dodd-Frank
Basel 2.5
Basel III
Contingent Convertible Bonds
Dodd-Frank Act
Legislation in Other Countries
Summary
Further Reading
Practice Questions and Problems
Further Questions
Market Risk VaR: The Historical Simulation Approach
The Methodology
Accuracy
Extensions
Computational Issues
Extreme Value Theory
Applications of EVT
Summary
Further Reading
Practice Questions and Problems
Further Questions
Market Risk VaR: The Model-Building Approach
The Basic Methodology
Generalization
Correlation and Covariance Matrices
Handling Interest Rates
Applications of the Linear Model
Linear Model and Options
Quadratic Model
Monte Carlo Simulation
Non-Normal Assumptions
Model-Building vs. Historical Simulation
Summary
Further Reading
Practice Questions and Problems
Further Questions
Credit Risk: Estimating Default Probabilities
Credit Ratings
Historical Default Probabilities
Recovery Rates
Credit Default Swaps
Credit Spreads
Estimating Default Probabilities from Credit Spreads
Comparison of Default Probability Estimates
Using Equity Prices to Estimate Default Probabilities
Summary
Further Reading
Practice Questions and Problems
Further Questions
Counterparty Credit Risk in Derivatives
Credit Exposure on Derivatives
Bilateral Clearing
Central Clearing
CVA
The Impact of a New Transaction
CVA Risk
Wrong Way Risk
DVA
Some Simple Examples
Summary
Further Reading
Practice Questions and Problems
Further Questions
Credit Value at Risk
Ratings Transition Matrices
Vasicek’s Model
Credit Risk Plus
CreditMetrics
Credit VaR in the Trading Book
Summary
Further Reading
Practice Questions and Problems
Further Questions
Scenario Analysis and Stress Testing
Generating the Scenarios
Regulation
What to Do with the Results
Summary
Further Reading
Practice Questions and Problems
Further Questions
Operational Risk
What is Operational Risk?
Determination of Regulatory Capital
Categorization of Operational Risks
Loss Severity and Loss Frequency
Implementation of AMA
Proactive Approaches
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