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Author:   Gilles Beneplanc (Region leader, Europe, Middle East, and Africa, Region leader, Europe, Middle East, and Africa, Mercer LLC) ,  Jean-Charles Rochet (Professor of Mathematics and Economics, Professor of Mathematics and Economics, University of Toulouse)
Publisher:   Oxford University Press Inc
Imprint:   Oxford University Press Inc
Dimensions:   Width: 23.60cm , Height: 1.80cm , Length: 15.70cm
Weight:   0.454kg
ISBN:  

9780199774081

ISBN 10:   0199774080
Pages:   224
Publication Date:   08 September 2011
Audience:   College/higher education ,  Postgraduate, Research & Scholarly
Format:   Hardback
Publisher's Status:   Active
Availability:   To order  
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Table of Contents

"INTRODUCTION I RISK MANAGEMENT: WHAT MUST BE CHANGED 1 Lessons From recent Financial Crises 1.1 The Basic Goals of Risk Management 1.2 When Risk Management Fails 1.3 What Should Be Done? 2 Living in Turbulent Times 2.1 New and Larger Risks 2.2 Increased Management Accountability 2.3 Need for a Global Approach 3 The Need for a Proper Methodology 3.1 The Necessary Ingredients 3.2 Risk Mapping 3.3 Loss Control 3.4 Risk Allocation II WHAT IS BEHIND RISK MODELING 4 The Basic Tools of Risk Modeling 4.1 Assessing Probabilities: The Frequentist and Subjective Approaches 4.2 Bayesian updating 4.3 Estimating Loss Distributions 4.4 Combining Event Trees and Monte Carlo Methods 4.5 The Dangers of the Stationarity Assumption 5 Statistical Risk Measures 5.1 The Expectation or Mean 5.2 The Variance 5.3 Linear Correlation 5.4 Copulas 5.5 The Value at Risk 5.6 Mutualization and Diversification 5.7 The Dangers of Using Simple Risk Measures Appendix: Extreme Value Theory 6 Leverage and Ruin Theory 6.1 Leverage and Return on Equity 6.2 Economic Capital for a Bank 6.3 Economic Capital for an Insurance Company 6.4 The Limits of Ruin Theory III THE PERFECT MARKETS HYPOTHESIS AND ITS DANGERS 7 Risk Neutral Valuation 7.1 The Expected Present Value Criterion 7.2 The Magic of Perfect Markets 7.3 Complete Markets and Absence of Arbitrage Opportunities 7.4 A Binomial Example 7.5 The Mirages of the Perfect Markets World 8 The Case of Incomplete Markets: Relating Risk Premiums to Economic Fundamentals 8.1 Solving the St Petersburg Paradox 8.2 Certainty Equivalent 8.3 Markets for Exchanging Risks 8.4 The Limits of the Equilibrium Approach 9 Risk Management in a Normal World 9.1 The Mean-Variance Criterion 9.2 Portfolio Choice 9.3 The Diversification Principle 9.4 Efficient Portfolios and the Sharpe Ratio 9.5 The Capital Asset Pricing Model (CAPM) 9.6 Futures Contracts and Hedging 9.7 Capital Allocation and RaRoc 9.8 The Dangers of Viewing the World as ""Normal"" Appendix 1: Portfolio Choice with Several Risky Assets Appendix 2: Deriving the CAPM Formula IV RISK MANAGEMENT AND SHAREHOLDER VALUE 10 Why Market Imperfections Matter for Shareholder Value 10.1 Standards Methods for Assessing Shareholder Value 10.2 Why is the Shareholder Value Function Likely to Be Non Linear: A Simple Example 10.3 Incentive Problems Generate Financial Frictions 11 The Shareholder Value Function 11.1 A Target Level of Cash 11.2 A Model for Optimizing Liquidity Management 11.3 Liquidity and Shareholder Value Appendix 1: Stochastic Differential Calculus Appendix 2: Derivation of the Shareholders Value Function 12 Risk Management and the Shareholder Value Function 12.1 How Much Risk to Take? 12.2 Which Risks to Insure? 12.3 How Much Liquidity to Keep in Reserves? 12.4 How Much hedging to Perform? V WHAT TO DO IN PRACTICE? 13 The Different Steps of the Implementation 13.1 Estimating the Shareholder Value Function 13.2 A Unifying Metric for Risk Mapping: The Risk Value Mapping 13.3 The New Instruments of Risk Management 14 Learning from an Example 14.1 Presentation of Med Corp 14.2 Risk Analysis 14.3 Shareholder Value and RM for Med Corp 14.4 A Risk Transfer Policy for Med Corp 15 Conclusion: Some Simple Messages 15.1 Message # 1: Quantitative models are needed but they have to be used with precaution 15.2 Message # 2: Risk Management creates value for shareholders 15.3 Message # 3: Things to do in practice 15.4 Message # 4: Key Ingredients for a successful RM approach Index"

Reviews

<br> This book is a breath of fresh air in the field of risk management. By bringing together one of the best research economists in the world with a top risk management practitioner, the book offers the reader deep insights into the theory and practice of risk management and its effect on firm value and financial stability. The final chapter on 'What To Do' is a must read. This book will become required reading for students of finance and economics, for private sector practitioners and for policy makers and economists concerned with financial stability. --Hyun Song Shin, Hughes-Rogers Professor of Economics, Princeton University<p><br> After a financial crisis of the magnitude of the 2008-2009 crisis, it is normal to see a lot of soul searching going on in financial markets. This book is an important contribution to this movement. Gilles B?n?planc and Jean-Charles Rochet give a remarkable analysis of the difficulties of risk management in times of crisis. But contrary to many, they do

This book is a breath of fresh air in the field of risk management. By bringing together one of the best research economists in the world with a top risk management practitioner, the book offers the reader deep insights into the theory and practice of risk management and its effect on firm value and financial stability. The final chapter on 'What To Do' is a must read. This book will become required reading for students of finance and economics, for private sector practitioners and for policy makers and economists concerned with financial stability. --Hyun Song Shin, Hughes-Rogers Professor of Economics, Princeton University After a financial crisis of the magnitude of the 2008-2009 crisis, it is normal to see a lot of soul searching going on in financial markets. This book is an important contribution to this movement. Gilles Beneplanc and Jean-Charles Rochet give a remarkable analysis of the difficulties of risk management in times of crisis. But contrary to many, they do not stop at the criticisms but propose interesting ways to move ahead. They introduce a healthy skepticism towards the approach to let models decide what the risks are, and at the same time they show how one can greatly improve them by introducing common sense and sophisticated mathematics in their construction, like extreme value theory. This book will be invaluable reading for both practitioners and academics that deal with risk management and risk-modeling. --Michel Dacorogna, Group Deputy Chief Risk Officer, SCOR SE Coming out of the financial crisis, teaching as well as practice of risk management have shown numerous weaknesses. This book puts the record straight! The authors present a wonderful balance between theory-practice, banking-insurance, quantitative-qualitative. Their findings are summarized through the novel notion of Shareholder Value Function. The result is a true gem, a book that will appeal to many and needs to be read by all with an interest in (corporate) risk management. --Paul Embrechts, RiskLab, ETH Zurich

<br> This book is a breath of fresh air in the field of risk management. By bringing together one of the best research economists in the world with a top risk management practitioner, the book offers the reader deep insights into the theory and practice of risk management and its effect on firm value and financial stability. The final chapter on 'What To Do' is a must read. This book will become required reading for students of finance and economics, for private sector practitioners and for policy makers and economists concerned with financial stability. --Hyun Song Shin, Hughes-Rogers Professor of Economics, Princeton University<p><br> After a financial crisis of the magnitude of the 2008-2009 crisis, it is normal to see a lot of soul searching going on in financial markets. This book is an important contribution to this movement. Gilles B n planc and Jean-Charles Rochet give a remarkable analysis of the difficulties of risk management in times of crisis. But contrary to many, they do

Author Information

Gilles Bénéplanc is the Head of Europe, Middle East, and Africa region for the Mercer consulting firm. Jean-Charles Rochet is Professor of Mathematics and Economics at the University of Toulouse.

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