Market risk analysis - Carol Alexander

Written by leading market risk academic, Professor Carol Alexander,Value-at-Risk Models forms part four of the Market RiskAnalysis four volume set. Building on the three previousvolumes this book provides by far the most comprehensive, rigorousand detailed treatment of market VaR models. It rests on the basicknowledge of financial mathematics and statistics gained fromVolume I, of factor models, principal component analysis,statistical models of volatility and correlation and copulas fromVolume II and, from Volume III, knowledge of pricing and hedgingfinancial instruments and of mapping portfolios of similarinstruments to risk factors. A unifying characteristic of theseries is the pedagogical approach to practical examples that arerelevant to market risk analysis in practice.

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

• Parametric linear value at risk (VaR)models: normal, Student tand normal mixture and their expected tail loss (ETL);
• New formulae for VaR based on autocorrelated returns;
• Historical simulation VaR models: how to scale historical VaRand volatility adjusted historical VaR;
• Monte Carlo simulation VaR models based on multivariate normaland Student t distributions, and based on copulas;
• Examples and case studies of numerous applications to interestrate sensitive, equity, commodity and internationalportfolios;
• Decomposition of systematic VaR of large portfolios intostandard alone and marginal VaR components;
• Backtesting and the assessment of risk model risk;
• Hypothetical factor push and historical stress tests, andstress testing based on VaR and ETL.