The Professional Risk Managers' Guide to Finance Theory and Application

This comprehensive reference brings together ten of the world's leading scholars and practitioners, who provide invaluable perspectives on all aspects of finance theory and how they are applied to the process of risk management.

The book begins with an overview of risk and risk aversion, introducing utility functions and the mean-variance criterion. It then delivers a thorough introduction to portfolio mathematics, including discussion of the efficient frontier, portfolio theory, and portfolio diversification.

Written to help you fortify your defenses against extreme, unanticipated outcomes, and to ensure that returns are an adequate reward for risks taken, The Professional Risk Managers' Guide to Finance Theory and Application covers key issues such as:

• The theory of capital allocation
• Capital structure, that is, debt versus equity financing
• The CAPM and multifactor models
• Interest rate models
• The term structure of interest rates
• No-arbitrage pricing of futures and forwards
• Risk-neutral valuation of options

Offering a global view not found elsewhere, The Professional Risk Managers' Guide to Finance Theory and Application arms institutional investors, professional financial analysts and traders, auditors, corporate treasurers, regulators and actuaries with the practical tools to master any financial field.

The Professional Risk Managers' International Association (PRMIA) is a higher standard for risk professionals with more than 50,000 members from over 180 countries. A non-profit, member-led association of professionals, PRMIA is dedicated to advancing the standards of the profession worldwide through the free exchange of ideas. PRMIA offers the only globally endorsed Professional Risk Manager (PRMTM) certification program, pursued by over 2,500 active candidates in more than 95 countries.

Carol Alexander is Professor of Risk Management and Director of Research at the ICMA Centre, UK and Chair of the Academic Advisory Council of PRMIA.

Elizabeth Sheedy is an Associate Professor at the Macquarie Applied Finance Centre in Sydney, Australia.