Market Risk Analysis, Practical Financial Econometrics - Hardcover

Alexander, Carol

Hardcover

ISBN 10: 0470998016 ISBN 13: 9780470998014

Publisher: Wiley, 2008

Synopsis

Written by leading market risk academic, Professor Carol Alexander, Practical Financial Econometrics forms part two of the Market Risk Analysis four volume set. It introduces the econometric techniques that are commonly applied to finance with a critical and selective exposition, emphasising the areas of econometrics, such as GARCH, cointegration and copulas that are required for resolving problems in market risk analysis. The book covers material for a one-semester graduate course in applied financial econometrics in a very pedagogical fashion as each time a concept is introduced an empirical example is given, and whenever possible this is illustrated with an Excel spreadsheet.

All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM. Empirical examples and case studies specific to this volume include:

• Factor analysis with orthogonal regressions and using principal component factors;
• Estimation of symmetric and asymmetric, normal and Student t GARCH and E-GARCH parameters;
• Normal, Student t, Gumbel, Clayton, normal mixture copula densities, and simulations from these copulas with application to VaR and portfolio optimization;
• Principal component analysis of yield curves with applications to portfolio immunization and asset/liability management;
• Simulation of normal mixture and Markov switching GARCH returns;
• Cointegration based index tracking and pairs trading, with error correction and impulse response modelling;
• Markov switching regression models (Eviews code);
• GARCH term structure forecasting with volatility targeting;
• Non-linear quantile regressions with applications to hedging.

About this title

About the Author

Carol Alexander is a Professor of Risk Management at the ICMA Centre, University of Reading, and Chair of the Academic Advisory Council of the Professional Risk Manager’s International Association (PRMIA). She is the author of Market Models: A Guide to Financial Data Analysis(John Wiley & Sons Ltd, 2001) and has been editor and contributor of a very large number of books in finance and mathematics, including the multi-volume Professional Risk Manager's Handbook(McGraw-Hill, 2008 and PRMIA Publications). Carol has published nearly 100 academic journal articles, book chapters and books, the majority of which focus on financial risk management and mathematical finance. Professor Alexander is one of the world's leading authorities on market risk analysis. For further details, see www.icmacentre.rdg.ac.uk/alexander.

From the Back Cover

Written by leading market risk academic, Professor Carol Alexander, Practical Financial Econometrics forms part two of the Market Risk Analysis four volume set. It introduces the econometric techniques that are commonly applied to finance with a critical and selective exposition, emphasising the areas of econometrics, such as GARCH, cointegration and copulas that are required for resolving problems in market risk analysis. The book covers material for a one-semester graduate course in applied financial econometrics in a very pedagogical fashion as each time a concept is introduced an empirical example is given, and whenever possible this is illustrated with an Excel spreadsheet.

All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include:

• Factor analysis with orthogonal regressions and using principal component factors;
• Estimation of symmetric and asymmetric, normal and Student tGARCH and E-GARCH parameters;
• Normal, Student t, Gumbel, Clayton, normal mixture copula densities, and simulations from these copulas with application to VaR and portfolio optimization;
• Principal component analysis of yield curves with applications to portfolio immunization and asset/liability management;
• Simulation of normal mixture and Markov switching GARCH returns;
• Cointegration based index tracking and pairs trading, with error correction and impulse response modelling;
• Markov switching regression models (Eviews code);
• GARCH term structure forecasting with volatility targeting;
• Non-linear quantile regressions with applications to hedging.

From the Inside Flap

Market Risk Analysis is a series of four volumes:

Volume I: Quantitative Methods in Finance

Volume II: Practical Financial Econometrics

Volume III: Pricing, Hedging and Trading Financial Instruments

Volume IV: Value at Risk Models.

Although the four volumes are very much interlinked, each containing numerous cross-references to other volumes, they are written as self-contained texts.

Volume I covers the essential mathematical and financial background for subsequent volumes. There are six comprehensive chapters covering all the calculus, linear algebra, probability and statistics, numerical methods and portfolio mathematics that are necessary for market risk analysis. It is a complete and pedagogical introduction to quantitative methods applied to finance.

Volume II provides a detailed understanding of financial econometrics, with a unique focus on applications to asset pricing, fund management and market risk analysis. It covers equity factor models, including a detailed analysis of the Barra model and tracking error, principal component analysis, volatility and correlation, GARCH, cointegration, copulas, Markov switching, quantile regression, discrete choice models, non-linear regression, forecasting and model evaluation.

Volume III has five extensive chapters on the pricing, hedging and trading of bonds and swaps, futures and forwards, options and volatility, and detailed descriptions of mapping portfolios of these financial instruments to their risk factors. There are numerous examples, all coded in interactive Excel spreadsheets, including many pricing formulae for exotic options but excluding the calibration of stochastic volatility models, for which Matlab code is provided.

Volume IV builds on the three previous volumes to provide a comprehensive and detailed treatment of market VaR models. The exposition starts at an elementary level but, as in all the other volumes, the pedagogical approach accompanied by numerous interactive Excel spreadsheets allows readers to experience the application of parametric linear, historical simulation and Monte Carlo VaR models to increasingly complex portfolios. Starting with simple positions, readers are soon applying risk models to large international securities portfolios, commodity futures, path dependent options and much else. This rigorous treatment includes many new results and applications to regulatory and economic capital allocation, measurement of VaR model risk and stress testing.

Each volume is accompanied by a CD-ROM which features numerous interactive Excel spreadsheets that illustrate the vast majority of the problems and case studies in these texts. For further information see the accompanying CD-ROM

Edition details

• Publisher: Wiley
• Publication date: 2008
• ISBN 10: 0470998016
• ISBN 13: 9780470998014
• Binding: Hardcover
• Language: English
• Number of pages: 432