Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk, 2nd Edition

Preface

This book offers a detailed introduction to the field of risk management as performed at large investment and commercial banks, with an emphasis on the practices of specialist market risk and credit risk departments as well as trading desks. A large portion of these practices is also applicable to smaller institutions that engage in trading or asset management.

The aftermath of the financial crisis of 2007–2008 leaves a good deal of uncertainty as to exactly what the structure of the financial industry will look like going forward. Some of the business currently performed in investment and commercial banks, such as proprietary trading, may move to other institutions, at least in some countries, based on new legislation and new regulations. But in whatever institutional setting this business is conducted, the risk management issues will be similar to those encountered in the past. This book focuses on general lessons as to how the risk of financial institutions can be managed rather than on the specifics of particular regulations.

My aim in this book is to be comprehensive in looking at the activities of risk management specialists as well as trading desks, at the realm of mathematical finance as well as that of the statistical techniques, and, most important, at how these different approaches interact in an integrated risk management process.

This second edition reflects lessons that have been learned from the recent financial crisis of 2007–2008 (for more detail, see ...