Models at Work: A Practitioner's Guide to Risk Management (Global Financial Markets) - Hardcover

Jawwad Ahmed Farid

Hardcover

ISBN 10: 1137371633 ISBN 13: 9781137371638

Publisher: Palgrave Macmillan, 2013

Synopsis

This book provides a much needed 'middle ground' for risk practitioners who need an in-depth understanding of risk management without excessive formulae or theory. Written to appeal to a broad but financially-minded audience, it provides coverage of risk management and the frameworks commonly applied in the financial services industry.

About this title

From the Author

I am not a Quant. 
I always wanted to be one but it took a single meeting with Goldman's Firmwide risk team in London to clear any delusions I may have harbored. All remaining reservations were removed in the one PhD elective in Finance that I took with Maria Vassalou at Columbia. Despite Maria's kindness and dedication it was obvious in April 1999 that I was just an ordinary mortal and not a Quant. 
In 1999, the realization wasn't heart breaking. If one couldn't live in the exotic world of high finance, the less exalted levels in the banking and trading world offered enough to keep you engaged and happy as a professional. 
But that was then. The last eight years have left no doubt that the impact of quantitative models travels beyond the inner circle of the more mathematically inclined amongst us.  Imagine being a board member at a large bank or a financial institution; imagine the board meeting dossier filled with numbers and graphs that come with no cheat sheet or Rosetta Stone and then envisage the need for you, as a board member, to initial and certify it all with your name and reputation.  
The challenge is, that armed without a PhD in the subject or years of experience on the trading desk, most of us are hopelessly lost when it comes to dissecting models at work. Even if one wants to learn there is little material available in a language that ordinary mortals can understand. The foundation of the field of risk management is based on well aged sciences of mathematics and statistics. It is but natural that books heavy on mathematical and statistical treatment of the subject are common and abundant, while those relying on simple layperson language and do it yourself modeling in EXCEL are not.
Ideally, a book should introduce a framework for managing risk and follow it through with a number of real world illustrative examples with numbers and data. If you are interested, it should allow you to build and test simple models that you can then use to strengthen your understanding of the conditions under which models can breakdown or predict where things can go wrong. A great text would educate you enough to not only ask the right questions but also evaluate and digest the answers provided. 
Over the last decade, as we put together teaching notes for participants in our workshops for bankers, traders, treasurers and executive MBA students, we found that the above design on teaching risk management worked well.  The challenge most professionals face is not with theoretical derivations but practical applications and translation into the real world. 
If you are looking for detailed mathematical derivations, differential equations or easy answers, you will be disappointed. 
The book is about building intuition around risk and using simple tools in EXCEL to test that intuition against the real world and occasionally with economic drivers.  Taleb calls it "playing with the generator function". My mentors in the field have called it the "Build, Test, Dissect, Decode" mode of learning.  Till you figure out how to break it, you won't really learn how it works. 
The book shows you how to build some models, shares the framework that you can use to test and stretch the same and in some instances gives you the data to extend them. But it stops short of putting it all together. It will show you the way and partially unlock the door, but you have to make the effort to open it and walk inside. 
This book is for you if you ever wondered about risk and its implications in the real world; if you wanted to model risk but felt awed by the terminology; if you like to question assumptions and test them in EXCEL; if your board is a "What if" board and you want to put a better process around that one troubling question;  and if you wanted to be a quant, but like me, are not. 

About the Author

Jawwad Farid has been building and implementing risk models since August 1998. Working with clients on four continents he helps bankers, board members and regulators take a market relevant approach to risk management. He is the founder of Alchemy Technologies, a risk consulting practice and writes about risk and treasury products at FinanceTrainingCourse.com.

Jawwad's expertise includes investment management, product development and risk models. He has advised multiple due diligence teams on risk assessment in banking and insurance sectors, set up FX and commodity hedging desks, built fair value models for illiquid securities for FAS 157 disclosures, helped a 3 billion US$ dollar life insurance fund on allocation and bid patterns for 20 and 30 year bonds, ALM mismatch and fixed income strategy.

He has worked with the securities and banking regulator and the Asian Development Bank on assessing the state of the corporate bond market as well as issued valuation opinions on cross currency swaps, participating forwards and contingent liabilities for Exchange Guarantee Funds in the region.

Jawwad is a Fellow Society of Actuaries (Schaumburg, IL), holds an MBA from Columbia Business School and is a computer science graduate (NUCES FAST). He is an adjunct Faculty member at the SP Jain Global School of Management in Dubai and Singapore where he teaches Risk Management, Derivative Pricing, Project Finance and Entrepreneurship.

Edition details

• Publisher: Palgrave Macmillan
• Publication date: 2013
• ISBN 10: 1137371633
• ISBN 13: 9781137371638
• Binding: Hardcover
• Language: English
• Number of pages: 651