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The Professional Risk Managers’ Handbook留学作业网提供留学生风险管理作业写作需求A Comprehensive Guide to Current Theory and Best Practices

The Official Handbook for the PRM CertificationThe PRM HandbookContentsAuthor BiographiesIntroduction David R. KoenigSECTION I – FINANCE THEORY, FINANCIAL INSTRUMENTS AND MARKETSPreface I Zvi WienerA – FINANCE THEORYI.A.1 Risk and Risk AversionJacques PezierI.A.1.1 IntroductionI.A.1.2 Mathematical Expectations: Prices or Utilities?I.A.1.3 The Axiom of Independence of ChoiceI.A.1.4 Maximising Expected UtilityI.A.1.4.1 The Four Basic AxiomsI.A.1.4.2 Introducing the Utility FunctionI.A.1.4.3 Risk Aversion (and Risk Tolerance)I.A.1.4.4 Certain EquivalenceI.A.1.4.5 SummaryI.A.1.5 Encoding a Utility FunctionI.A.1.5.1 For an IndividualI.A.1.5.2 For a FirmI.A.1.5.3 Ironing out AnomaliesI.A.1.6 The Mean–Variance CriterionI.A.1.6.1 The CriterionI.A.1.6.2 Estimating Risk ToleranceI.A.1.6.3 Applications of the Mean–Variance CriterionI.A.1.7 Risk-Adjusted Performance MeasuresI.A.1.7.1 The Sharpe RatioI.A.1.7.2 RAPMs in an Equilibrium MarketI.A. The Treynor Ratio and Jensen’s AlphaI.A. Application of the Treynor RatioI.A. Application of Jensen’s AlphaI.A.1.7.3 Generalising Sharpe RatiosI.A. The Generalised Sharpe RatioI.A. The Adjusted Sharpe RatioI.A.1.7.4 Downside RAPMsI.A. RAROCI.A. Sortino Ratio, Omega Index and other Kappa indicesI.A.1.8 SummaryAppendix I.A.1.A: TerminologyAppendix I.A.1.B: Utility FunctionsI.A.1.B.1 The Exponential Utility FunctionI.A.1.B.2 The Logarithmic Utility FunctionI.A.1.B.3 The Quadratic Utility FunctionI.A.1.B.4 The Power Utility FunctionI.A.2 Portfolio MathematicsPaul GlassermanI.A.2.1 Means and Variances of Past Returns2004 © The Professional Risk Managers’ International Association iiThe PRM HandbookI.A.2.1.1 ReturnsI.A.2.1.2 Mean, Variance and Standard DeviationI.A.2.1.3 Portfolio Mean, Variance and Standard DeviationI.A.2.1.4 CorrelationI.A.2.1.5 Correlation and Portfolio VarianceI.A.2.1.6 Portfolio Standard DeviationI.A.2.2 Mean and Variance of Future ReturnsI.A.2.2.1 Single AssetI.A.2.2.2 Covariance and CorrelationI.A.2.2.3 Mean and Variance of a Linear CombinationI.A.2.2.4 Example: Portfolio ReturnI.A.2.2.5 Example: Portfolio ProfitI.A.2.2.6 Example: Long and Short PositionsI.A.2.2.7 Example: CorrelationI.A.2.3 Mean-Variance TradeoffsI.A.2.3.1 Achievable Expected ReturnsI.A.2.3.2 Achievable Variance and Standard DeviationI.A.2.3.3 Achievable Combinations of Mean and Standard DeviationI.A.2.3.4 Efficient FrontierI.A.2.3.5 Utility MaximizationI.A.2.3.6 Varying the Correlation ParameterI.A.2.4 Multiple AssetsI.A.2.4.1 Portfolio Mean and VarianceI.A.2.4.2 Vector Matrix NotationI.A.2.4.3 Efficient FrontierI.A.2.5 A Hedging ExampleI.A.2.5.1 Problem FormulationI.A.2.5.2 Gallon-for-Gallon HedgeI.A.2.5.3 Minimum-Variance HedgeI.A.2.5.4 Effectiveness of the Optimal HedgeI.A.2.5.5 Connection with RegressionI.A.2.6 Serial CorrelationI.A.2.7 Normally Distributed ReturnsI.A.2.7.1 The Distribution of Portfolio ReturnsI.A.2.7.2 Value-at-RiskI.A.2.7.3 Probability of Reaching a TargetI.A.2.7.4 Probability of Beating a BenchmarkI.A.3 Capital AllocationKeith Cuthbertson, Dirk NitzscheI.A.3.1 An OverviewI.A.3.1.1 Portfolio DiversificationI.A.3.1.2 Tastes and Preferences for Risk versus ReturnI.A.3.2 Mean–Variance CriterionI.A.3.3 Efficient Frontier: Two Risky AssetsI.A.3.3.1 Different Values of the Correlation CoefficientI.A.3.4 Asset AllocationI.A.3.4.1 The efficient frontier: n risky assetsI.A.3.5 Combining the Risk-Free Asset with Risky AssetsI.A.3.6 The Market Portfolio and the CMLI.A.3.7 The Market Price of Risk and the Sharpe RatioI.A.3.8 Separation PrincipleI.A.3.9 SummaryAppendix: Mathematics of the Mean–Variance Model2004 © The Professional Risk Managers’ International Association iiiThe PRM HandbookI.A.4 The CAPM and Multifactor ModelsKeith Cuthbertson, Dirk NitzscheI.A.4.1 OverviewI.A.4.2 Capital Asset Pricing ModelI.A.4.2.1 Estimating BetaI.A.4.2.2 Beta and Systematic RiskI.A.4.3 Security Market LineI.A.4.4 Performance MeasuresI.A.4.4.1 Sharpe RatioI.A.4.4.2 Jensen’s ‘alpha’I.A.4.5 The Single-Index ModelI.A.4.6 Multifactor Models and the APTI.A.4.6.1 Portfolio ReturnsI.A.4.7 SummaryI.A.5 Basics of Capital StructureSteven BishopI.A.5.1 IntroductionI.A.5.2 Maximising Shareholder Value, Incentives and Agency CostsI.A.5.2.1 Agency CostsI.A. Agency Cost of EquityI.A. Agency Costs of DebtI.A.5.2.2 Information AsymmetriesI.A.5.3 Characteristics of Debt and EquityI.A.5.4 Choice of Capital StructureI.A.5.4.1 Do not think debt is attractive because the interest rate is lowerthan the cost of equity!I.A.5.4.2 Debt can be attractiveI.A. Differential treatment of payments to debt-holders andshareholders#p#分页标题#e#I.A. Greater FlexibilityI.A. Monitoring ‘improves’ performance and reduces thenegative aspect of information asymmetryI.A. Debt enforces a discipline of paying out operating earningsI.A. Debt financing avoids negative signals aboutmanagement’s view of the value of equityI.A.5.4.3 Debt can also be unattractiveI.A. Exposure to bankruptcy costsI.A. Exposure to financial distress costsI.A. Agency costsI.A.5.4.4 Thus choose the point where disadvantages offset advantagesI.A.5.5 Making the capital structure decisionI.A.5.5.1 GuidelinesI.A.5.5.2 What do CFOs say they consider when making a capital structure choice?I.A.5.6 ConclusionI.A.6 The Term Structure of Interest RatesDeborah Cernauskas, Elias DemetriadesI.A.6.1 Compounding MethodsI.A.6.1.1 Continuous versus Discrete CompoundingI.A.6.1.2 Annual Compounding versus More Regular CompoundingI.A.6.1.3 Periodic Interest Rates versus Effective Annual YieldI.A.6.2 Term Structure – A Definition2004 © The Professional Risk Managers’ International Association ivThe PRM HandbookI.A.6.3 Shapes of the Yield CurveI.A.6.4 Spot and Forward RatesI.A.6.5 Term Structure TheoriesI.A.6.5.1 Pure or Unbiased ExpectationsI.A.6.5.2 Liquidity PreferenceI.A.6.5.3 Market SegmentationI.A.6.6 SummaryI.A.7 Valuing Forward ContractsDon ChanceI.A.7.1 The Difference between Pricing and Valuation for Forward ContractsI.A.7.2 Principles of Pricing and Valuation for Forward Contracts on AssetsI.A.7.2.1 The Value at Time 0 of a Forward ContractI.A.7.2.2 The Value at Expiration of a Forward Contract on an AssetI.A.7.2.3 The Value Prior to Expiration of a Forward Contract on an AssetI.A.7.2.4 The Value of a Forward Contract on an Asset when there areCash Flows on the Asset during the Life of the ContractI.A.7.2.5 Establishing the Price of a Forward Contract on an AssetI.A.7.2.6 Pricing and Valuation when the Cash Flows or Holding Costs areContinuousI.A.7.2.7 Numerical ExamplesI.A.7.3 Principles of Pricing and Valuation for Forward Contracts on Interest RatesI.A.7.3.1 The Value of an FRA at ExpirationI.A.7.3.2 The Value of an FRA at the StartI.A.7.3.3 The Value of an FRA During Its LifeI.A.7.3.4 Pricing the FRA on Day 0I.A.7.3.5 Numerical ExamplesI.A.7.4 The Relationship Between Forward and Futures PricesI.A.8 Basic Principles of Option PricingPaul WilmottI.A.8.1 Factors Affecting Option PricesI.A.8.2 Put–Call ParityI.A.8.3 One-step Binomial Model and the Riskless PortfolioI.A.8.4 Delta Neutrality and Simple Delta HedgingI.A.8.5 Risk-Neutral ValuationI.A.8.6 Real versus Risk-Neutral#p#分页标题#e#I.A.8.7 The Black–Scholes–Merton Pricing FormulaI.A.8.8 The GreeksI.A.8.9 Implied VolatilityI.A.8.10 Intrinsic versus Time ValueB – FINANCIAL INSTRUMENTSI.B.1 General Characteristics of BondsLionel Martellini, Philippe PriauletI.B.1.1 Definition of a Bullet BondI.B.1.2 Terminology and ConventionI.B.1.3 Market QuotesI.B.1.3.1 Bond Quoted PriceI.B.1.3.2 Bond Quoted YieldI.B.1.3.3 Bond Quoted SpreadI.B.1.3.4 Liquidity Spreads2004 © The Professional Risk Managers’ International Association vThe PRM HandbookI.B.1.3.5 The Bid–Ask SpreadI.B.1.4 Non-bullet BondsI.B.1.4.1 StripsI.B.1.4.2 Floating-Rate NotesI.B.1.4.3 Inflation-Indexed BondsI.B.1.5 SummaryI.B.2 The Analysis of BondsMoorad ChoudhryI.B.2.1 Features of BondsI.B.2.1.1 Type of IssuerI.B.2.1.2 Term to MaturityI.B.2.1.3 Principal and Coupon RateI.B.2.1.4 CurrencyI.B.2.2 Non-conventional BondsI.B.2.2.1 Floating-Rate NotesI.B.2.2.2 Index-Linked BondsI.B.2.2.3 Zero-Coupon BondsI.B.2.2.4 Securitised BondsI.B.2.2.5 Bonds with Embedded OptionsI.B.2.3 Pricing a Conventional BondI.B.2.3.1 Bond Cash FlowsI.B.2.3.2 The Discount RateI.B.2.3.3 Conventional Bond PricingI.B.2.3.4 Pricing Undated BondsI.B.2.3.5 Pricing ConventionsI.B.2.3.6 Clean and Dirty Bond Prices: Accrued InterestI.B.2.4 Market YieldI.B.2.4.1 Yield MeasurementI.B.2.4.2 Current YieldI.B.2.4.3 Yield to MaturityI.B.2.5 Relationship between Bond Yield and Bond PriceI.B.2.6 DurationI.B.2.6.1 Calculating Macaulay Duration and Modified DurationI.B.2.6.2 Properties of the Macaulay DurationI.B.2.6.3 Properties of the Modified DurationI.B.2.7 Hedging Bond PositionsI.B.2.8 ConvexityI.B.2.9 A Summary of Risks Associated with BondsI.B.3 Futures and ForwardsKeith Cuthbertson, Dirk NitzscheI.B.3.1 IntroductionI.B.3.2 Stock Index FuturesI.B.3.2.1 Contract SpecificationsI.B.3.2.2 Index arbitrage and program tradingI.B.3.2.3 Hedging Using Stock Index FuturesI.B.3.2.4 Tailing the HedgeI.B.3.2.5 SummaryI.B.3.3 Currency Forwards and FuturesI.B.3.3.1 Currency Forward ContractsI.B.3.3.2 Currency Futures ContractsI.B.3.3.3 Hedging Currency Futures and ForwardsI.B.3.3.4 Summary2004 © The Professional Risk Managers’ International Association viThe PRM HandbookI.B.3.4 Commodity FuturesI.B.3.5 Forward Rate AgreementsI.B.3.5.1 Settlement ProceduresI.B.3.6 Short-Term Interest-Rate FuturesI.B.3.6.1 US T-bill FuturesI.B.3.6.2 Three-Month Eurodollar FuturesI.B.3.6.3 Sterling Three-Month FuturesI.B.3.6.4 Hedging Interest-Rate Futures#p#分页标题#e#I.B.3.6.5 Hedge RatiosI.B.3.6.6 Hedging Using US T-bill FuturesI.B.3.6.7 SummaryI.B.3.7 T-bond FuturesI.B.3.7.1 Contract SpecificationsI.B. UK Long Gilt Futures ContractI.B. US T-bond Futures ContractI.B.3.7.2 Conversion Factor and Cheapest to DeliverI.B.3.7.3 Hedging Using T-bond FuturesI.B.3.7.4 Hedging a Single BondI.B.3.7.5 Hedging a Portfolio of BondsI.B.3.7.6 SummaryI.B.3.8 Stack and Strip HedgesI.B.3.9 Concluding RemarksI.B.4 SwapsSalih NeftciI.B.4.1 What is a Swap?I.B.4.2 Types of SwapsI.B.4.2.1 Equity SwapsI.B.4.2.2 Commodity SwapsI.B.4.2.3 Interest Rate SwapsI.B.4.2.4 Currency SwapsI.B.4.2.5 Basis SwapsI.B.4.2.6 Volatility SwapsI.B.4.3 Engineering Interest-Rate SwapsI.B.4.4 Risk of SwapsI.B.4.4.1 Market RiskI.B.4.4.2 Credit Risk and Counterparty RiskI.B.4.4.3 Volatility and Correlation RiskI.B.4.5 Other SwapsI.B.4.6 Uses of SwapsI.B.4.6.1 Uses of Equity SwapsI.B.4.7 Swap ConventionsI.B.5 Vanilla OptionsPaul WilmottI.B.5.1 Stock Options – Characteristics and Payoff DiagramsI.B.5.2 American versus European OptionsI.B.5.3 Strategies Involving a Single Option and a StockI.B.5.4 Spread StrategiesI.B.5.4.1 Bull and Bear SpreadsI.B.5.4.2 Calendar SpreadsI.B.5.5 Other StrategiesI.B.5.5.1 Straddles and StranglesI.B.5.5.2 Risk Reversal2004 © The Professional Risk Managers’ International Association viiThe PRM HandbookI.B.5.5.3 CollarsI.B.5.5.4 Butterflies and CondorsI.B.6 Credit DerivativesMoorad ChoudhryI.B.6.1 IntroductionI.B.6.1.1 Why Use Credit Derivatives?I.B.6.1.2 Classification of Credit Derivative InstrumentsI.B.6.1.3 Definition of a Credit EventI.B.6.2 Credit Default SwapsI.B.6.3 Credit-Linked NotesI.B.6.4 Total Return SwapsI.B.6.4.1 Synthetic RepoI.B.6.4.2 Reduction in Credit RiskI.B.6.4.3 Capital Structure ArbitrageI.B.6.4.4 The TRS as a Funding InstrumentI.B.6.5 Credit OptionsI.B.6.6 Synthetic Collateralised Debt ObligationsI.B.6.6.1 Cash Flow CDOsI.B.6.6.2 What is a Synthetic CDO?I.B.6.6.3 Funding Synthetic CDOsI.B.6.6.4 Variations in Synthetic CDOsI.B.6.6.5 Use of Synthetic CDOsI.B.6.6.6 Advantages and Limitations of Synthetic StructuresI.B.6.7 General Applications of Credit DerivativesI.B.6.7.1 Use of Credit Derivatives by Portfolio ManagersI.B. Enhancing portfolio returnsI.B. Reducing credit exposureI.B. Credit switches and zero-cost credit exposureI.B. Exposure to market sectorsI.B. Trading Credit spreadsI.B.6.7.2 Use of Credit Derivatives by Banks#p#分页标题#e#I.B.6.8 Unintended Risks in Credit DerivativesI.B.6.9 SummaryI.B.7 Caps, Floors & SwaptionsLionel Martellini, Philippe PriauletI.B.7.1 Caps, Floors and Collars: Definition and TerminologyI.B.7.2 Pricing Caps, Floors and CollarsI.B.7.2.1 Cap FormulaI.B.7.2.2 Floor FormulaI.B.7.2.3 Market QuotesI.B.7.3 Uses of Caps, Floors and CollarsI.B.7.3.1 Limiting the Financial Cost of Floating-Rate LiabilitiesI.B.7.3.2 Protecting the Rate of Return of a Floating-Rate AssetI.B.7.4 Swaptions: Definition and TerminologyI.B.7.5 Pricing SwaptionsI.B.7.5.1 European Swaption Pricing FormulaI.B.7.5.2 Market QuotesI.B.7.6 Uses of SwaptionsI.B.7.7 Summary2004 © The Professional Risk Managers’ International Association viiiThe PRM HandbookI.B.8 Convertible BondsIzzy NelkenI.B.8.1 IntroductionI.B.8.1.1 Convertibles – a definitionI.B.8.1.2 Convertible Bond Market SizeI.B.8.1.3 A Brief HistoryI.B.8.2 Characteristics of ConvertiblesI.B.8.2.1 Relationship with Stock PriceI.B.8.2.2 Call and Put FeaturesI.B.8.2.3 Players in the Convertible Bond MarketI.B.8.2.4 Convertible Bond FundsI.B.8.2.5 Convertible Arbitrage Hedge FundsI.B.8.3 Capital Structure Implications (for Banks)I.B.8.4 Mandatory ConvertiblesI.B.8.5 Valuation and Risk AssessmentI.B.8.6 SummaryI.B.9 Simple ExoticsCatriona MarchI.B.9.1 IntroductionI.B.9.2 A Short HistoryI.B.9.3 Classifying ExoticsI.B.9.4 NotationI.B.9.5 Digital OptionsI.B.9.5.1 Cash-or-Nothing OptionsI.B.9.5.2 Asset-or-Nothing OptionsI.B.9.5.3 Vanillas and Digitals as Building BlocksI.B.9.5.4 Contingent Premium OptionsI.B.9.5.5 Range NotesI.B.9.5.6 Managing Digital OptionsI.B.9.6 Two Asset OptionsI.B.9.6.1 Product and Quotient OptionsI.B.9.6.2 Exchange OptionsI.B.9.6.3 Outperformance OptionsI.B.9.6.4 Other Two-Colour Rainbow OptionsI.B.9.6.5 Spread OptionsI.B.9.6.6 Correlation RiskI.B.9.7 QuantosI.B.9.7.1 Foreign Asset Option Struck in Foreign CurrencyI.B.9.7.2 Foreign Asset Option Struck in Domestic CurrencyI.B.9.7.3 Implied CorrelationI.B.9.7.4 Foreign Asset Linked Currency OptionI.B.9.7.5 Guaranteed Exchange Rate Foreign Asset OptionsI.B.9.8 Second-Order ContractsI.B.9.8.1 Compound OptionsI.B.9.8.2 Typical Uses of Compound OptionsI.B.9.8.3 Instalment OptionsI.B.9.8.4 Extendible OptionsI.B.9.9 Decision OptionsI.B.9.9.1 American OptionsI.B.9.9.2 Bermudan OptionsI.B.9.9.3 Shout OptionsI.B.9.10 Average OptionsI.B.9.10.1 Average Rate and Average Strike Options2004 © The Professional Risk Managers’ International Association ix#p#分页标题#e#The PRM HandbookI.B.9.10.2 Motivations and UsesI.B.9.10.3 Other Options Involving AveragesI.B.9.10.4 Pricing and Hedging Average OptionsI.B.9.11 Options on Baskets of AssetsI.B.9.11.1 Basket OptionsI.B.9.11.2 Pricing and Hedging Basket OptionsI.B.9.11.3 Mountain OptionsI.B.9.12 Barrier and Related OptionsI.B.9.12.1 Single-Barrier OptionsI.B.9.12.2 No-Touch, One-Touch and RebatesI.B.9.12.3 Partial-Barrier OptionsI.B.9.12.4 Double-Barrier OptionsI.B.9.12.5 Even More Barrier OptionsI.B.9.12.6 RelationshipsI.B.9.12.7 LaddersI.B.9.12.8 Lookback and Hindsight OptionsI.B.9.13 Other Path-Dependent OptionsI.B.9.13.1 Forward Start OptionsI.B.9.13.2 Reset OptionsI.B.9.13.3 Cliquet OptionsI.B.9.14 Resolution MethodsI.B.9.15 SummaryC – MARKETSI.C.1 The Structure of Financial MarketsColin Lawrence, Alistair MilneI.C.1.1 IntroductionI.C.1.2 Global Markets and Their TerminologyI.C.1.3 Drivers of LiquidityI.C.1.3.1 Repo MarketsI.C.1.4 Liquidity and Financial Risk ManagementI.C.1.5 Exchanges versus OTC MarketsI.C.1.6 Technological ChangeI.C.1.7 Post-trade ProcessingI.C.1.8 Retail and Wholesale BrokerageI.C.1.9 New Financial MarketsI.C.1.10 ConclusionI.C.2 The Money MarketsCanadian Securities InstituteI.C.2.1 IntroductionI.C.2.2 Characteristics of Money Market InstrumentsI.C.2.3 Deposits and LoansI.C.2.3.1 Deposits from BusinessesI.C.2.3.2 Loans to BusinessesI.C.2.3.3 Repurchase AgreementsI.C.2.3.4 International MarketsI.C.2.3.5 The London Interbank Offered Rate (LIBOR)I.C.2.4 Money Market SecuritiesI.C.2.4.1 Treasury BillsI.C.2.4.2 Commercial PaperI.C.2.4.3 Bankers’ AcceptancesI.C.2.4.4 Certificates of Deposit2004 © The Professional Risk Managers’ International Association xThe PRM HandbookI.C.2.5 SummaryI.C.3 The Bond MarketMoorad Choudhry, Lionel Martellini, Philippe PriauletI.C.3.1 IntroductionI.C.3.2 The PlayersI.C.3.2.1 Intermediaries and BanksI.C.3.2.2 Institutional InvestorsI.C.3.2.3 Market ProfessionalsI.C.3.3 Bonds by IssuersI.C.3.3.1 Government BondsI.C.3.3.2 US Agency BondsI.C.3.3.3 Municipal BondsI.C.3.3.4 Corporate BondsI.C.3.3.5 Eurobonds (International Bonds)I.C.3.4 The MarketsI.C.3.4.1 The Government Bond MarketI.C.3.4.2 The Corporate Bond MarketI.C. The market by country and sectorI.C. Underwriting a new issueI.C.3.4.3 The Eurobond MarketI.C.3.4.4 Market ConventionsI.C.3.5 Credit RiskI.C.3.6 SummaryI.C.4 The Foreign Exchange MarketCanadian Securities Institute, Toronto#p#分页标题#e#I.C.4.1 IntroductionI.C.4.2 The Interbank MarketI.C.4.3 Exchange-Rate QuotationsI.C.4.3.1 Direct DealingI.C.4.3.2 Foreign Exchange BrokersI.C.4.3.3 Electronic Brokering SystemsI.C.4.3.4 The Role of the US DollarI.C.4.3.5 Market and Quoting ConventionsI.C.4.3.6 Cross Trades and Cross RatesI.C.4.4 Determinants of Foreign Exchange RatesI.C.4.4.1 The Fundamental ApproachI.C.4.4.2 A Short-Term ApproachI.C.4.4.3 Central Bank InterventionI.C.4.5 Spot and Forward MarketsI.C.4.5.1 The Spot MarketI.C.4.5.2 The Forward MarketI.C. Forward Discounts and PremiumsI.C. Interest-Rate ParityI.C.4.6 Structure of a Foreign Exchange OperationI.C.4.7 Summary/ConclusionI.C.5 The Stock MarketAndrew StreetI.C.5.1 IntroductionI.C.5.2 The Characteristics of Common StockI.C.5.2.1 Share Premium and Capital Accounts and Limited Liability2004 © The Professional Risk Managers’ International Association xiThe PRM HandbookI.C.5.2.2 Equity Shareholder’s Rights and DividendsI.C.5.2.3 Other Types of Equity Shares – Preference SharesI.C.5.2.4 Equity Price DataI.C.5.2.5 Market Capitalisation (or ‘Market Cap’)I.C.5.2.6 Stock Market IndicesI.C.5.2.7 Equity ValuationI.C.5.3 Stock Markets and their ParticipantsI.C.5.3.1 The Main Participants – Firms, Investment Banks and InvestorsI.C.5.3.2 Market MechanicsI.C.5.4 The Primary Market – IPOs and Private PlacementsI.C.5.4.1 Basic Primary Market ProcessI.C.5.4.2 Initial Public OfferingsI.C.5.4.3 Private PlacementsI.C.5.5 The Secondary Market – the Exchange versus OTC MarketI.C.5.5.1 The ExchangeI.C.5.5.2 The Over-the-Counter MarketI.C.5.6 Trading CostsI.C.5.6.1 CommissionsI.C.5.6.2 Bid–Offer SpreadI.C.5.6.3 Market ImpactI.C.5.7 Buying on MarginI.C.5.7.1 LeverageI.C.5.7.2 Percentage Margin and Maintenance MarginI.C.5.7.3 Why Trade on Margin?I.C.5.8 Short Sales and Stock Borrowing CostsI.C.5.8.1 Short SaleI.C.5.8.2 Stock BorrowingI.C.5.9 Exchange-Traded Derivatives on StocksI.C.5.9.1 Single Stock and Index OptionsI.C.5.9.2 Expiration DatesI.C.5.9.3 Strike PricesI.C.5.9.4 Flex OptionsI.C.5.9.5 Dividends and Corporate ActionsI.C.5.9.6 Position LimitsI.C.5.9.7 TradingI.C.5.10 SummaryI.C.6 The Futures MarketCanadian Securities InstituteI.C.6.1 IntroductionI.C.6.2 History of Forward-Based Derivatives and Futures MarketsI.C.6.3 Futures Contracts and MarketsI.C.6.3.1 General Characteristics of Futures Contracts and MarketsI.C.6.3.2 Settlement of Futures ContractsI.C.6.3.3 Types of OrdersI.C.6.3.4 Margin Requirements and Marking to Market#p#分页标题#e#I.C.6.3.5 LeverageI.C.6.3.6 Reading a Futures Quotation PageI.C.6.3.7 Liquidity and Trading CostsI.C.6.4 Options on FuturesI.C.6.5 Futures Exchanges and Clearing HousesI.C.6.5.1 ExchangesI.C.6.5.2 Futures Exchange FunctionsI.C.6.5.3 Clearing HousesI.C.6.5.4 Marking-to-Market and Margin2004 © The Professional Risk Managers’ International Association xiiThe PRM HandbookI.C.6.6 Market Participants – HedgersI.C.6.7 Market Participants – SpeculatorsI.C.6.7.1 LocalsI.C.6.7.2 Day TradersI.C.6.7.3 Position TradersI.C.6.7.4 SpreadersI.C. Intramarket SpreadsI.C. Intercommodity SpreadsI.C. Intermarket SpreadsI.C. Commodity Product SpreadI.C.6.8 Market Participants – Managed Futures InvestorsI.C.6.9 Summary and ConclusionI.C.7 The Structure of Commodities MarketsColin Lawrence, Alistair MilneI.C.7.1 IntroductionI.C.7.2 The Commodity Universe and Anatomy of MarketsI.C.7.2.1 Commodity Types and CharacteristicsI.C.7.2.2 The Markets for TradingI.C.7.2.3 Delivery and Settlement MethodsI.C.7.2.4 Commodity Market LiquidityI.C.7.2.5 The Special Case of Gold as a Reserve AssetI.C.7.3 Spot–Forward Pricing RelationshipsI.C.7.3.1 Backwardation and ContangoI.C.7.3.2 Reasons for BackwardationI.C.7.3.3 The No-Arbitrage ConditionI.C.7.4 Short Squeezes, Corners and RegulationI.C.7.4.1 Historical ExperienceI.C.7.4.2 The Exchange LimitsI.C.7.5 Risk Management at the Commodity Trading DeskI.C.7.6 The Distribution of Commodity ReturnsI.C.7.6.1 Evidence of Non-normalityI.C.7.6.2 What Drives Commodity Prices?I.C.7.7 ConclusionsI.C.8 The Energy MarketsPeter FusaroI.C.8.1 IntroductionI.C.8.2 Market OverviewI.C.8.2.1 The ProductsI.C.8.2.2 The RisksI.C.8.2.3 Developing a Cash MarketI.C.8.3 Energy Futures MarketsI.C.8.3.1 The ExchangesI.C.8.3.2 The ContractsI.C.8.3.3 Options on Energy FuturesI.C.8.3.4 Hedging in Energy Futures MarketsI.C.8.3.5 Physical DeliveryI.C.8.3.6 Market Changes: Backwardation and ContangoI.C.8.4 OTC Energy Derivative MarketsI.C.8.4.1 The Singapore MarketI.C.8.4.2 The European Energy MarketsI.C.8.4.3 The North American MarketsI.C.8.5 Emerging Energy Commodity Markets2004 © The Professional Risk Managers’ International Association xiiiThe PRM HandbookI.C.8.5.1 Coal TradingI.C.8.5.2 Weather DerivativesI.C.8.5.3 Green TradingI.C.8.5.4 Freight-Rate SwapsI.C.8.5.5 Derivative Forward Price CurvesI.C.8.6 The Future of Energy TradingI.C.8.6.1 Re-emergence of Speculative Trading?I.C.8.6.2 Electronic Energy TradingI.C.8.6.3 Trading in Asian MarketsI.C.8.7 ConclusionSECTION II – MATHEMATICAL FOUNDATIONS OF RISK MEASUREMENTPreface II Carol AlexanderII.A FoundationsKeith Parramore, Terry WatshamII.A.1 Symbols and RulesII.A.1.1 Expressions, Functions, Graphs, Equations and GreekII.A.1.2 The Algebra of NumberII.A.1.3 The Order of OperationsII.A.2 Sequences and SeriesII.A.2.1 SequencesII.A.2.2 SeriesII.A.3 Exponents and LogarithmsII.A.3.1 ExponentsII.A.3.2 LogarithmsII.A.3.3 The Exponential Function and Natural LogarithmsII.A.4 Equations and InequalitiesII.A.4.1 Linear Equations in One UnknownII.A.4.2 InequalitiesII.A.4.3 Systems of Linear Equations in More Than One UnknownII.A.4.4 Quadratic EquationsII.A.5 Functions and GraphsII.A.5.1 FunctionsII.A.5.2 GraphsII.A.5.3 The Graphs of Some FunctionsII.A.6 Case Study − Continuous CompoundingII.A.6.1 Repeated CompoundingII.A.6.2 Discrete versus Continuous CompoundingII.A.7 SummaryII.B Descriptive StatisticsKeith Parramore, Terry WatshamII.B.1 IntroductionII.B.2 DataII.B.2.1 Continuous and Discrete DataII.B.2.2 Grouped DataII.B.2.3 Graphical Representation of DataII.B.2.3.1 The Frequency Bar ChartII.B.2.3.2 The Relative Frequency DistributionII.B.2.3.3 The Cumulative Frequency DistributionII.B.2.3.4 The HistogramII.B.3 The Moments of a Distribution2004 © The Professional Risk Managers’ International Association xivThe PRM HandbookII.B.4 Measures of Location or Central Tendency – AveragesII.B.4.1 The Arithmetic MeanII.B.4.2 The Geometric MeanII.B.4.3 The Median and the ModeII.B.5 Measures of DispersionII.B.5.1 VarianceII.B.5.2 Standard DeviationII.B.5.3 Case Study: Calculating Historical Volatility from Returns DataII.B.5.4 The Negative Semi-variance and Negative Semi-deviationII.B.5.5 SkewnessII.B.5.6 KurtosisII.B.6 Bivariate DataII.B.6.1 CovarianceII.B.6.2 The Covariance MatrixII.B.6.3 The Correlation CoefficientII.B.6.4 The Correlation MatrixII.B.6.5 Case Study: Calculating the Volatility of a PortfolioII.C CalculusKeith Parramore, Terry WatshamII.C.1 Differential CalculusII.C.1.1 FunctionsII.C.1.2 The First DerivativeII.C.1.3 NotationII.C.1.4 Simple RulesII.C.1.4.1 Differentiating ConstantsII.C.1.4.2 Differentiating a Linear FunctionII.C.1.4.3 The Gradient of a Straight LineII.C.1.4.4 The Derivative of a Power of xII.C.1.4.5 Differentiating a scalar multiple of a functionII.C.1.4.6 Differentiating the Sum of Two Functions of xII.C.1.4.7 Differentiating the Product of Two Functions of xII.C.1.4.8 Differentiating the Quotient of Two Functions of xII.C.1.4.9 Differentiating a Function of a FunctionII.C.1.4.10 Differentiating the Exponential FunctionII.C.1.4.11 Differentiating the Natural Logarithmic FunctionII.C.2 Case Study: Modified Duration of a BondII.C.3 Higher-Order DerivativesII.C.3.1 Second DerivativesII.C.3.2 Further DerivativesII.C.3.3 Taylor ApproximationsII.C.4 Financial Applications of Second DerivativesII.C.4.1 ConvexityII.C.4.2 Convexity in ActionII.C.4.3 The Delta and Gamma of an OptionII.C.5 Differentiating a Function of More than One VariableII.C.5.1 Partial DifferentiationII.C.5.2 Total differentiationII.C.6 Integral CalculusII.C.6.1 Indefinite and Definite IntegralsII.C.6.2 Rules for IntegrationII.C.6.3 GuessingII.C.7 OptimisationII.C.7.1 Finding the Minimum or Maximum of a Function of One VariableII.C.7.2 Maxima and Minima of Functions of More than One Variable2004 © The Professional Risk Managers’ International Association xvThe PRM HandbookII.C.7.3 Optimization Subject to Constraints: Lagrange MultipliersII.C.7.4 ApplicationsII.D Linear AlgebraKeith Parramore, Terry WatshamII.D.1 Matrix AlgebraII.D.1.1 MatricesII.D.1.2 Vectors and TransposesII.D.1.3 Manipulation of MatricesII.D.1.4 Matrix MultiplicationII.D.1.5 Inverting a MatrixII.D.2 Application of Matrix Algebra to Portfolio ConstructionII.D.2.1 Calculating the Risk of an Existing PortfolioII.D.2.2 Deriving Asset Weights for the Minimum Risk PortfolioII.D.2.3 Hedging a Vanilla Option PositionII.D.2.3.1 Calculating the position deltaII.D.2.3.2 Establishing the delta-neutral hedgeII.D.2.3.3 Gamma neutralityII.D.2.3.4 Vega neutralityII.D.2.3.5 Hedging a short option positionII.D.3 Quadratic FormsII.D.3.1 The Variance of Portfolio Returns as a Quadratic FormII.D.3.2 Definition of Positive DefinitenessII.D.4 Cholesky DecompositionII.D.4.1 The Cholesky ArithmeticII.D.4.2 Simulation in ExcelII.D.5 Eigenvalues and EigenvectorsII.D.5.1 Matrices as TransformationsII.D.5.2 Definition of Eigenvector and EigenvalueII.D.5.3 DeterminantsII.D.5.4 The Characteristic EquationII.D.5.4.1 Testing for Positive Semi-definitenessII.D.5.4.2 Using the characteristic equation to find the eigenvalues of acovariance matrixII.D.5.4.3 Eigenvalues and eigenvectors of covariance and correlation matricesII.D.5.5 Principal ComponentsII.E Probability Theory in FinanceKeith Parramore, Terry WatshamII.E.1 Definitions and RulesII.E.1.1 DefinitionsII.E.1.1.1 The classical approachII.E.1.1.2 The Bayesian approachII.E.1.2 Rules for ProbabilityII.E.1.2.1 (A or B) and (A and B)II.E.1.2.2 Conditional ProbabilityII.E.2 Probability DistributionsII.E.2.1 Random VariablesII.E.2.1.1 Discrete Random VariablesII.E.2.1.2 Continuous Random VariablesII.E.2.2 Probability Density Functions and HistogramsII.E.2.3 The Cumulative Distribution FunctionII.E.2.4 The Algebra of Random VariablesII.E.2.4.1 Scalar Multiplication of a Random Variable2004 © The Professional Risk Managers’ International Association xviThe PRM HandbookII.E.2.5 The Expected Value of a Discrete Random VariableII.E.2.6 The Variance of a Discrete Random VariableII.E.2.7 The Algebra of Continuous Random VariablesII.E.3 Joint DistributionsII.E.3.1 Bivariate Random VariablesII.E.3.2 CovarianceII.E.3.3 CorrelationII.E.3.4 The Expected Value and Variance of a Linear Combination of RandomVariablesII.E.4 Specific Probability DistributionsII.E.4.1 The Binomial DistributionII.E.4.1.1 Calculating the ‘Number of Ways’II.E.4.1.2 Calculating the Probability of r SuccessesII.E.4.1.3 Expectation and VarianceII.E.4.2 The Poisson DistributionII.E.4.2.1 IllustrationsII.E.4.2.2 Expectation and VarianceII.E.4.3 The Uniform Continuous DistributionII.E.4.4.1 Normal CurvesII.E.4.4.2 The Standard Normal Probability Density FunctionII.E.4.4.3 Finding Areas under a Normal Curve Using ExcelII.E.4.5 The Lognormal Probability DistributionII.E.4.5.1 Lognormal CurvesII.E.4.5.2 The Lognormal Distribution Applied to Asset PricesII.E.4.5.3 The Mean and Variance of the Lognormal DistributionII.E.4.5.4 Application of the Lognormal Distribution to Future Asset Prices [notin PRM exam]II.E.4.6 Student’s t DistributionII.E.4.7 The Bivariate Normal DistributionII.F RegressionKeith Parramore, Terry WatshamII.F.1 Simple Linear RegressionII.F.1.1 The ModelII.F.1.2 The Scatter PlotII.F.1.3 Estimating the ParametersII.F.2 Multiple Linear RegressionII.F.2.1 The modelII.F.2.2 Estimating the ParametersII.F.3 Evaluating the Regression ModelII.F.3.1 Intuitive InterpretationII.F.3.2 Adjusted R2II.F.3.3 Testing for Statistical SignificanceII.F.4 Confidence IntervalsII.F.4.1 Confidence Intervals for the Regression ParametersII.F.5 Hypothesis TestingII.F.5.1 Significance Tests for the Regression ParametersII.F.5.2 Significance Test for R2II.F.5.3 Type I and type II errorsII.F.6 PredictionII.F.7 Breakdown of the OLS AssumptionsII.F.7.1 HeteroscedasticityII.F.7.2 AutocorrelationII.F.7.3 MulticollinearityII.F.8 Random Walks and Mean-Reversion2004 © The Professional Risk Managers’ International Association xviiThe PRM HandbookII.F.9 Maximum Likelihood EstimationII.F.10 SummaryII.G Numerical MethodsKeith Parramore, Terry WatshamII.G.1 Solving (Non-differential) EquationsII.G.1.1 Three ProblemsII.G.1.2 BisectionII.G.1.3 Newton–RaphsonII.G.1.4 Goal SeekII.G.2 Numerical OptimisationII.G.2.1 The ProblemII.G.2.2 Unconstrained Numerical OptimisationII.G.2.3 Constrained Numerical OptimisationII.G.2.4 Portfolio Optimisation RevisitedII.G.3 Numerical Methods for Valuing OptionsII.G.3.1 Binomial LatticesII.G.3.2 Finite Difference MethodsII.G.3.3 SimulationII.G.4 SummarySECTION III – RISK MANAGEMENT PRACTICESPreface III Elizabeth SheedyIII.0 Capital Allocation and Risk Adjusted PerformanceAndrew Aziz, Dan RosenIII.0.1 IntroductionIII.0.1.1 Role of Capital in Financial InstitutionIII.0.1.2 Types of CapitalIII.0.1.3 Capital as a Management ToolIII.0.2 Economic CapitalIII.0.2.1 Understanding Economic CapitalIII.0.2.2 The Top-Down Approach to Calculating Economic CapitalIII. Top-Down Earnings Volatility ApproachIII. Top-Down Option-Theoretic ApproachIII.0.2.3 The Bottom-Up Approach to Calculating Economic CapitalIII.0.2.4 Stress Testing of Portfolio Losses and Economic CapitalIII.0.2.5 Enterprise Capital Practices – AggregationIII.0.2.6 Economic Capital as Insurance for the Value of the FirmIII.0.3 Regulatory CapitalIII.0.3.1 Regulatory Capital PrinciplesIII.0.3.2 The Basel Committee of Banking Supervision and the Basel AccordIII.0.3.3 Basel I RegulationIII. Minimum Capital Requirements under Basel IIII. Regulatory Arbitrage under Basel IIII. Meeting Capital Adequacy RequirementsIII.0.3.4 Basel II Accord – Latest ProposalsIII. Pillar 1 – Minimum Capital RequirementsIII. Pillar 2 – Supervisory ReviewIII. Pillar 3 – Market DisciplineIII.0.3.5 A Simple Derivation of Regulatory CapitalIII.0.4 Capital Allocation and Risk Contributions2004 © The Professional Risk Managers’ International Association xviiiThe PRM HandbookIII.0.4.1 Capital AllocationIII.0.4.2 Risk Contribution Methodologies for EC AllocationIII. Stand-alone EC ContributionsIII. Incremental EC ContributionsIII. Marginal EC ContributionsIII. Alternative Methods for Additive ContributionsIII.0.5 RAROC and Risk-Adjusted PerformanceIII.0.5.1 Objectives of RAPMIII.0.5.2 Mechanics of RAROCIII.0.5.3 RAROC and Capital Allocation MethodologiesIII.0.6 Summary and ConclusionsA – MARKET RISKIII.A.1 Market Risk ManagementJacques PezierIII.A.1.1 Introduction#p#分页标题#e#III.A.1.2 Market RiskIII.A.1.2.1 Why is Market Risk Management Important?III.A.1.2.2 Distinguishing Market Risk from Other RisksIII.A.1.3 Market Risk Management TasksIII.A.1.4 The Organisation of Market Risk ManagementIII.A.1.5 Market Risk Management in Fund ManagementIII.A.1.5.1 Market Risk in Fund ManagementIII.A.1.5.2 IdentificationIII.A.1.5.3 AssessmentIII.A.1.5.4 Control/MitigationIII.A.1.6 Market Risk Management in BankingIII.A.1.6.1 Market Risk in BankingIII.A.1.6.2 IdentificationIII.A.1.6.3 AssessmentIII.A.1.6.4 Control/MitigationIII.A.1.7 Market Risk Management in Non-financial FirmsIII.A.1.7.1 Market Risk in Non-Financial FirmsIII.A.1.7.2 IdentificationIII.A.1.7.3 AssessmentIII.A.1.7.4 Control/MitigationIII.A.1.8 SummaryIII.A.2 Introduction to Value at Risk ModelsKevin Dowd, David RoweIII.A.2.1 IntroductionIII.A.2.2 Definition of VaRIII.A.2.3 Internal Models for Market Risk CapitalIII.A.2.4 Analytical VaR ModelsIII.A.2.5 Monte Carlo Simulation VaRIII.A.2.5.1 MethodologyIII.A.2.5.2 Applications of Monte Carlo simulationIII.A.2.5.3 Advantages and Disadvantages of Monte Carlo VaRIII.A.2.6 Historical Simulation VaRIII.A.2.6.1 The Basic MethodIII.A.2.6.2 Weighted historical simulationIII.A.2.6.3 Advantages and Disadvantages of Historical ApproachesIII.A.2.7 Mapping Positions to Risk Factors2004 © The Professional Risk Managers’ International Association xixThe PRM HandbookIII.A.2.7.1 Mapping Spot PositionsIII.A.2.7.2 Mapping Equity PositionsIII.A.2.7.3 Mapping Zero-Coupon BondsIII.A.2.7.4 Mapping Forward/Futures PositionsIII.A.2.7.5 Mapping Complex PositionsIII.A.2.7.6 Mapping Options: Delta and Delta-Gamma ApproachesIII.A.2.8 Backtesting VaR ModelsIII.A.2.9 Why Financial Markets Are Not ‘Normal’III.A.2.10 SummaryIII.A.3 Advanced Value at Risk ModelsCarol Alexander, Elizabeth SheedyIII.A.3.1 IntroductionIII.A.3.2 Standard Distributional AssumptionsIII.A.3.3 Models of Volatility ClusteringIII.A.3.3.1 Exponentially Weighted Moving Average (EWMA)III.A.3.3.2 GARCH ModelsIII.A.3.4 Volatility Clustering and VaRIII.A.3.4.1 VaR using EWMAIII.A.3.4.2 VaR and GARCHIII.A.3.5 Alternative Solutions to Non-NormalityIII.A.3.5.1 VaR with the Student’s-t distributionIII.A.3.5.2 VaR with EVTIII.A.3.5.3 VaR with Normal MixturesIII.A.3.6 Decomposition of VaRIII.A.3.6.1 Stand Alone CapitalIII.A.3.6.2 Incremental VaRIII.A.3.6.3 Marginal CapitalIII.A.3.7 Principal Component AnalysisIII.A.3.7.1 PCA in ActionIII.A.3.7.2 VaR with PCAIII.A.3.8 SummaryIII.A.4 Stress Testing#p#分页标题#e#Barry SchachterIII.A.4.1 IntroductionIII.A.4.2 Historical ContextIII.A.4.3 Conceptual ContextIII.A.4.4 Stress Testing in PracticeIII.A.4.5 Approaches to Stress Testing: An OverviewIII.A.4.6 Historical ScenariosIII.A.4.6.1 Choosing Event PeriodsIII.A.4.6.2 Specifying Shock FactorsIII.A.4.6.3 Missing Shock FactorsIII.A.4.7 Hypothetical ScenariosIII.A.4.7.1 Modifying the Covariance MatrixIII.A.4.7.2 Specifying Factor Shocks (to ‘create’ an event)III.A.4.7.3 Systemic Events and Stress-Testing LiquidityIII.A.4.7.4 Sensitivity AnalysisIII.A.4.7.5 Hybrid MethodsIII.A.4.8 Algorithmic Approaches to Stress TestingIII.A.4.8.1 Factor-Push Stress TestsIII.A.4.8.2 Maximum LossIII.A.4.9 Extreme-Value Theory as a Stress-Testing Method2004 © The Professional Risk Managers’ International Association xxThe PRM HandbookIII.A.4.10 Summary and ConclusionsB – CREDIT RISKIII.B.1 Credit Risk ManagementAuthor to be confirmedIII.B.2 Foundations of Credit Risk ModellingPhilipp SchönbucherIII.B.2.1 IntroductionIII.B.2.2 What is Default Risk?III.B.2.3 Exposure, Default and Recovery ProcessesIII.B.2.4 The Credit Loss DistributionIII.B.2.5 Expected and Unexpected LossIII.B.2.6 Recovery RatesIII.B.2.7 ConclusionIII.B.3 Credit ExposurePhilipp SchönbucherIII.B.3.1 IntroductionIII.B.3.2 Pre-settlement versus Settlement RiskIII.B.3.2.1 Pre-settlement RiskIII.B.3.2.2 Settlement RiskIII.B.3.3 Exposure ProfilesIII.B.3.3.1 Exposure Profiles of Standard Debt ObligationsIII.B.3.3.2 Exposure Profiles of DerivativesIII.B.3.4 Mitigation of ExposuresIII.B.3.4.1 Netting AgreementsIII.B.3.4.2 CollateralIII.B.3.4.3 Other Counterparty Risk Mitigation InstrumentsIII.B.4 Default and Credit MigrationPhilipp SchönbucherIII.B.4.1 Default Probabilities and Term Structures of Default RatesIII.B.4.2 Credit RatingsIII.B.4.2.1 Measuring Rating AccuracyIII.B.4.3 Agency RatingsIII.B.4.3.1 MethodologyIII.B.4.3.2 Transition Matrices, Default Probabilities and Credit MigrationIII.B.4.4 Credit Scoring and Internal Rating ModelsIII.B.4.4.1 Credit ScoringIII.B.4.4.2 Estimation of the Probability of DefaultIII.B.4.4.3 Other Methods to Determine the Probability of DefaultIII.B.4.5 Market Implied Default ProbabilitiesIII.B.4.5.1 Pricing the Calibration SecuritiesIII.B.4.5.2 Calculating implied default probabilitiesIII.B.4.6 Credit rating and credit spreadsIII.B.4.7 Summary2004 © The Professional Risk Managers’ International Association xxiThe PRM HandbookIII.B.5 Portfolio Models of Credit LossMichel Crouhy, Dan Galai, Robert Mark#p#分页标题#e#III.B.5.1 IntroductionIII.B.5.2 What Actually Drives Credit Risk at the Portfolio Level?III.B.5.3 Credit Migration FrameworkIII.B.5.3.1 Credit VaR for a Single Bond/LoanIII.B.5.3.2 Estimation of Default and Rating Changes CorrelationsIII.B.5.3.3 Credit VaR of a Bond/Loan PortfolioIII.B.5.4 Conditional Transition Probabilities– CreditPortfolioViewIII.B.5.5 The Contingent Claim Approach to Measuring Credit RiskIII.B.5.5.1 Structural Model of Default Risk: Merton’s (1974) ModelIII.B.5.5.2 Estimating Credit Risk as a Function of Equity ValueIII.B.5.6 The KMV ApproachIII.B.5.6.1 Estimation of the Asset Value VA and the Volatility of Asset ReturnIII.B.5.6.2 Calculation of the ‘Distance to Default’III.B.5.6.3 Derivation of the Probabilities of Default from the Distance toDefaultIII.B.5.6.4 EDF as a Predictor of DefaultIII.B.5.7 The Actuarial ApproachIII.B.5.8 Summary and ConclusionIII.B.6 Credit Risk Capital CalculationDan RosenIII.B.6.1 IntroductionIII.B.6.2 Economic Credit Capital CalculationIII.B.6.2.1 Economic Capital and the Credit Portfolio ModelIII.B. Time HorizonIII.B. Credit Loss DefinitionIII.B. Quantile of the Loss DistributionIII.B.6.2.2 Expected and Unexpected LossesIII.B.6.2.3 Enterprise Credit Capital and Risk AggregationIII.B.6.3 Regulatory Credit Capital: Basel IIII.B.6.3.1 Minimum Credit Capital Requirements under Basel IIII.B.6.3.2 Weaknesses of the Basel I Accord for Credit RiskIII.B.6.3.3 Regulatory ArbitrageIII.B.6.4 Regulatory Credit Capital: Basel IIIII.B.6.4.1 Latest Proposal for Minimum Credit Capital requirementsIII.B.6.4.2 The Standardised Approach in Basel IIIII.B.6.4.3 Internal Ratings Based Approaches: IntroductionIII.B.6.4.4 IRB for Corporate, Bank and Sovereign ExposuresIII.B.6.4.5 IRB for Retail ExposuresIII.B.6.4.6 IRB for SME ExposuresIII.B.6.4.7 IRB for Specialised Lending and Equity ExposuresIII.B.6.4.8 Comments on Pillar IIIII.B.6.5 Basel II: Credit Model Estimation and ValidationIII.B.6.5.1 Methodology for PD EstimationIII.B.6.5.2 Point-in-Time and Through-the-Cycle RatingsIII.B.6.5.3 Minimum Standards for Quantification and Credit Monitoring ProcessesIII.B.6.5.4 Validation of EstimatesIII.B.6.6 Basel II: SecuritisationIII.B.6.7 Advanced Topics on Economic Credit CapitalIII.B.6.7.1 Credit Capital Allocation and Marginal Credit Risk ContributionsIII.B.6.7.2 Shortcomings of VaR for ECC and Coherent Risk MeasuresIII.B.6.8 Summary and Conclusions2004 © The Professional Risk Managers’ International Association xxiiThe PRM HandbookC – OPERATIONAL RISKIII.C.1 The Operational Risk Management FrameworkMichael OngIII.C.1.1 IntroductionIII.C.1.2 Evidence of Operational FailuresIII.C.1.3 Defining Operational RiskIII.C.1.4 Types of Operational RiskIII.C.1.5 Aims and Scope of Operational Risk ManagementIII.C.1.6 Key Components of Operational RiskIII.C.1.7 Supervisory Guidance on Operational RiskIII.C.1.8 Identifying Operational Risk – the Risk CatalogueIII.C.1.9 The Operational Risk Assessment ProcessIII.C.1.10 The Operational Risk Control ProcessIII.C.1.11 Some Final ThoughtsIII.C.2 Operational Risk Process ModelsJames LamIII.C.2.1 IntroductionIII.C.2.2 The Overall ProcessIII.C.2.3 Specific ToolsIII.C.2.4 Advanced ModelsIII.C.2.4.1 Top-down modelsIII.C.2.4.2 Bottom-up modelsIII.C.2.5 Key Attributes of the ORM FrameworkIII.C.2.6 Integrated Economic Capital ModelIII.C.2.7 Management ActionsIII.C.2.8 Risk TransferIII.C.2.9 IT OutsourcingIII.C.2.9.1 Stakeholder ObjectivesIII.C.2.9.2 Key ProcessesIII.C.2.9.3 Performance MonitoringIII.C.2.9.4 Risk MitigationIII.C.3 Operational Value-at-RiskCarol AlexanderIII.C.3.1 The ‘Loss Model’ ApproachIII.C.3.2 The Frequency DistributionIII.C.3.3 The Severity DistributionIII.C.3.4 The Internal Measurement ApproachIII.C.3.5 The Loss Distribution ApproachIII.C.3.6 Aggregating ORCIII.C.3.7 Concluding Remarks2004 © The Professional Risk Managers’ International Association xxiiiThe PRM Handbook留学作业网提供留学生风险管理作业写作需求IntroductionIf you're reading this, you are seeking to attain a higher standard. Congratulations!Those of us who have been a part of financial risk management for the past twenty years, haveseen it change from an on-the-fly profession, with improvisation as a rule, to one withsubstantially higher standards, many of which are now documented and expected to be followed.It’s no longer enough to say you know. Now, you and your team need to prove it.As its title implies, this book is the Handbook for the Professional Risk Manager. It is for thoseprofessionals who seek to demonstrate their skills through certification as a Professional RiskManager (PRM) in the field of financial risk management. And it is for those looking simply todevelop their skills through an excellent reference source.With contributions from nearly 40 leading authors, the Handbook is designed to provide youwith the materials needed to gain the knowledge and understanding of the building blocks ofprofessional financial risk management. Financial risk management is not about avoiding risk.Rather, it is about understanding and communicating risk, so that risk can be taken moreconfidently and in a better way. Whether your specialism is in insurance, banking, energy, assetmanagement, weather, or one of myriad other industries, this Handbook is your guide.We encourage you to work through it sequentially. In Section I, we introduce the foundations offinance theory, the financial instruments that provide tools for the mitigation or transfer of risk,and the financial markets in which instruments are traded and capital is raised. After studying thissection, you will have read the materials necessary for passing Exam I of the PRM Certificationprogram.In Section II, we take you through the mathematical foundations of risk assessment. While therearemanynuancesto the practice of risk management that go beyond the quantitative, it isessential today for every risk manager to be able to assess risks. The chapters in this section areaccessible to all PRM members, including those without any quantitative skills. The Excelspreadsheets that accompany the examples are an invaluable aid to understanding themathematical and statistical concepts that form the basis of risk assessment. After studying allthese chapters, you will have read the materials necessary for passage of Exam II of the PRMCertification program.In Section III, the current and best practices of Market, Credit and Operational risk managementare described. This is where we take the foundations of Sections I and II and apply them to our2004 © The Professional Risk Managers’ International AssociationThe PRM Handbook


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