Quantitative Risk Management: A Practical Guide to Financial Risk, + Website

Preface

Risk management is the art of using lessons from the past to mitigate misfortune and exploit future opportunities—in other words, the art of avoiding the stupid mistakes of yesterday while recognizing that nature can always create new ways for things to go wrong.

This book grew out of a project for the Research Foundation of the CFA Institute. The Research Foundation asked me to write a monograph, a short and practical guide to risk management. I took the commission as a license to write about how I think about risk. Ultimately the project grew far beyond the original mandate and into this book, a book that is, I hope, still a practical guide to financial risk management.

In this book I lay out my view of risk management, a view that has developed over many years as a researcher, trader, and manager. My approach is a little idiosyncratic because risk management itself suffers from a split personality—one side soft management skills, the other side hard mathematics—and any attempt to treat both in the same book will by its nature be something of an experiment. In writing this book I want to do more than just write down the mathematical formulae; I want to explain how we should think about risk, what risk means, why we use a particular risk measure. Most importantly, I want to challenge the accepted wisdom that risk management is or ever should be a separate discipline; managing risk is central to managing a financial firm and must remain the responsibility of anyone who ...