ECONOMIC FOUNDATIONS OF RISK MANAGEMENT, THE: THEORY, PRACTICE, AND APPLICATIONS - Hardcover

Robert Jarrow

Hardcover

ISBN 10: 9813147512 ISBN 13: 9789813147515

Publisher: World Scientific Publishing Co, 2017

Synopsis

The Economic Foundations of Risk Management presents the theory, the practice, and applies this knowledge to provide a forensic analysis of some well-known risk management failures. By doing so, this book introduces a unified framework for understanding how to manage the risk of an individual's or corporation's or financial institution's assets and liabilities. The book is divided into five parts. The first part studies the markets and the assets and liabilities that trade therein. Markets are differentiated based on whether they are competitive or not, frictionless or not (and the type of friction), and actively traded or not. Assets are divided into two types: primary assets and financial derivatives. The second part studies models for determining the risks of the traded assets. Models provided include the Black-Scholes-Merton, the Heath-Jarrow-Morton, and the reduced form model for credit risk. Liquidity risk, operational risk, and trading constraint models are also contained therein. The third part studies the conceptual solution to an individual's, firm's, and bank's risk management problem. This formulation involves solving a complex dynamic programming problem that cannot be applied in practice. Consequently, Part IV investigates how risk management is actually done in practice via the use of diversification, static hedging, and dynamic hedging. Finally, Part V applies these collective insights to six case studies, which are famous risk management failures. These are Penn Square Bank, Metallgesellschaft, Orange County, Barings Bank, Long Term Capital Management, and Washington Mutual. The credit crisis is also discussed to understand how risk management failed for many institutions and why.

Readership: Graduate students and researchers interested in the topic of risk management.

About this title

About the Author

Professor Jarrow's teaching and research interests involve the study of mathematical finance. He is interested in derivatives, risk management, investments and asset pricing theory. Jarrow is currently engaged in research relating to asset management, liquidity risk, and risk management. He is a graduate faculty representative in four fields: management, economics, operations research and information engineering, and applied mathematics. Jarrow is on the advisory board of Mathematical Finance and he is an associate editor for numerous other finance journals. His research has won numerous awards including the Graham and Dodd Scrolls Award 2001, the CBOE Pomerance Prize in 1982, and the Ross Best Paper Award in 2008. In 1997, he was named IAFE Financial Engineer of the Year in recognition of his research accomplishments. He is currently an IAFE senior fellow and an FDIC senior fellow. He is in the Fixed Income Analysts Society Hall of Fame, Risk Magazine's 50 member Hall of Fame, and listed in the Who's Who of Economics. He received Risk Magazine's Lifetime Achievement Award in 2009. He also serves on various corporate board of directors and advisory boards.

Edition details

• Publisher: World Scientific Publishing Co
• Publication date: 2017
• Language: English
• ISBN 10: 9813147512
• ISBN 13: 9789813147515
• Binding: Hardcover
• Number of pages: 208