Part I: Background Risk Management and Financial Returns The Dangers of VaR and Historical Simulation. A Primer on Financial Econometrics. NEW Part 2: Portfolio Level Risk Models Volatility Modeling using Daily Returns Volatility Modeling using Intraday Returns. NEW Modeling the Conditional Distribution Part 3: Asset Level Risk Models Correlation Modeling Copula Models and Integrated Risk Management. NEW Simulating the Term Structure of Risk Part 4: Further Topics Option Pricing Option Risk Management CDS Pricing and Credit Risk Management. NEW Backtesting and Stress Testing.

Summary: The Second Edition of this best-selling book expands its advanced approach to financial risk models by covering market, credit, and integrated risk. With new data that cover the recent financial crisis, it combines Excel-based empirical exercises at the end of each chapter with online exercises so readers can use their own data. Its unified GARCH modeling approach, empirically sophisticated and relevant yet easy to implement, sets this book apart from others. Four new chapters and updated end-of-chapter questions and exercises, as well as Excel-solutions manual and PowerPoint slides, support its step-by-step approach to choosing tools and solving problems. Examines market risk, credit risk, and operational risk Provides exceptional coverage of GARCH models Features online Excel-based empirical exercises.

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Enhanced descriptions from Syndetics:

The Second Edition of this best-selling book expands its advanced approach to financial risk models by covering market, credit, and integrated risk. With new data that cover the recent financial crisis, it combines Excel-based empirical exercises at the end of each chapter with online exercises so readers can use their own data. Its unified GARCH modeling approach, empirically sophisticated and relevant yet easy to implement, sets this book apart from others. Five new chapters and updated end-of-chapter questions and exercises, as well as Excel-solutions manual, support its step-by-step approach to choosing tools and solving problems.

The Second Edition of this best-selling book expands its advanced approach to financial risk models by covering market, credit, and integrated risk. With new data that cover the recent financial crisis, it combines Excel-based empirical exercises at the end of each chapter with online exercises so readers can use their own data. Its unified GARCH modeling approach, empirically sophisticated and relevant yet easy to implement, sets this book apart from others. Four new chapters and updated end-of-chapter questions and exercises, as well as Excel-solutions manual and PowerPoint slides, support its step-by-step approach to choosing tools and solving problems. Examines market risk, credit risk, and operational risk Provides exceptional coverage of GARCH models Features online Excel-based empirical exercises.

Electronic reproduction. Amsterdam : Elsevier Science & Technology, 2011. Mode of access: World Wide Web. System requirements: Web browser. Title from title screen (viewed on Nov. 29, 2011). Access may be restricted to users at subscribing institutions.

Table of contents provided by Syndetics

Preface (p. xiii)
Acknowledgments (p. xv)
Part I Background (p. 1)
1 Risk Management and Financial Returns (p. 3)
1 Chapter Outline (p. 3)
2 Learning Objectives (p. 3)
3 Risk Management and the Firm (p. 4)
4 A Brief Taxonomy of Risks (p. 6)
5 Asset Returns Definitions (p. 7)
6 Stylized Facts of Asset Returns (p. 9)
7 A Generic Model of Asset Returns (p. 11)
8 From Asset Returns to Portfolio Returns (p. 12)
9 Introducing the Value-at-Risk (VaR) Risk Measure (p. 12)
10 Overview of the Book (p. 16)
Appendix: Return VaR and $VaR (p. 17)
Further Resources (p. 18)
References (p. 18)
Empirical Exercises (p. 19)
2 Historical Simulation, Value at Risk, and Expected Shortfall (p. 21)
1 Chapter Overview (p. 21)
2 Historical Simulation (p. 21)
3 Weighted Historical Simulation (WHS) (p. 24)
4 Evidence from the 2008-2009 Crisis (p. 28)
5 The True Probability of Breaching the HS VaR (p. 31)
6 VaR with Extreme Coverage Rates (p. 32)
7 Expected Shortfall (p. 33)
8 Summary (p. 36)
Further Resources (p. 37)
References (p. 37)
Empirical Exercises (p. 38)
3 A Primer on Financial Time Series Analysis (p. 39)
1 Chapter Overview (p. 39)
2 Probability Distributions and Moments (p. 40)
3 The Linear Model (p. 45)
4 Univariate Time Series Models (p. 48)
5 Multivariate Time Series Models (p. 59)
6 Summary (p. 62)
Further Resources (p. 63)
References (p. 63)
Empirical Exercises (p. 64)
Part II Univariate Risk Models (p. 65)
4 Volatility Modeling Using Daily Data (p. 67)
1 Chapter Overview (p. 67)
2 Simple Variance Forecasting (p. 68)
3 The GARCH Variance Model (p. 70)
4 Maximum Likelihood Estimation (p. 73)
5 Extensions to the GARCH Model (p. 76)
6 Variance Model Evaluation (p. 82)
7 Summary (p. 86)
Appendix A Component GARCH and GARCH(2,2) (p. 86)
Appendix B The HYGARCH Long-Memory Model (p. 88)
Further Resources (p. 89)
References (p. 89)
Empirical Exercises (p. 91)
5 Volatility Modeling Using Intraday Data (p. 93)
1 Chapter Overview (p. 93)
2 Realized Variance: Four Stylized Facts (p. 94)
3 Forecasting Realized Variance (p. 98)
4 Realized Variance Construction (p. 103)
5 Data Issues (p. 107)
6 Range-based Volatility Modeling (p. 110)
7 GARCH Variance Forecast Evaluation Revisited (p. 115)
8 Summary (p. 116)
Further Resources (p. 116)
References (p. 117)
Empirical Exercises (p. 119)
6 Nonnormal Distributions (p. 121)
1 Chapter Overview (p. 121)
2 Learning Objectives (p. 121)
3 Visualizing Nonnormality Using QQ Plots (p. 123)
4 The Filtered Historical Simulation Approach (p. 125)
5 The Cornish-Fisher Approximation to VaR (p. 126)
6 The Standardized t Distribution (p. 128)
7 The Asymmetric t Distribution (p. 133)
8 Extreme Value Theory (EVT) (p. 137)
9 Summary (p. 143)
Appendix A ES for the Symmetric and Asymmetric t Distributions (p. 144)
Appendix B Cornish-Fisher ES (p. 145)
Appendix C Extreme Value Theory ES (p. 146)
Further Resources (p. 147)
References (p. 147)
Empirical Exercises (p. 149)
Part III Multivariate Risk Models (p. 151)
7 Covariance and Correlation Models (p. 153)
1 Chapter Overview (p. 153)
2 Portfolio Variance and Covariance (p. 154)
3 Dynamic Conditional Correlation (DCC) (p. 159)
4 Estimating Daily Covariance from Intraday Data (p. 165)
5 Summary (p. 168)
Further Resources (p. 169)
References (p. 170)
Empirical Exercises (p. 171)
8 Simulating the Term Structure of Risk (p. 173)
1 Chapter Overview (p. 173)
2 The Risk Term Structure in Univariate Models (p. 174)
3 The Risk Term Structure with Constant Correlations (p. 182)
4 The Risk Term Structure with Dynamic Correlations (p. 186)
5 Summary (p. 189)
Further Resources (p. 189)
References (p. 190)
Empirical Exercises (p. 191)
9 Distributions and Copulas for Integrated Risk Management (p. 193)
1 Chapter Overview (p. 193)
2 Threshold Correlations (p. 194)
3 Multivariate Distributions (p. 195)
4 The Copula Modeling Approach (p. 203)
5 Risk Management Using Copula Models (p. 210)
6 Summary (p. 213)
Further Resources (p. 213)
References (p. 214)
Empirical Exercises (p. 215)
Part IV Further Topics in Risk Management (p. 217)
10 Option Pricing (p. 219)
1 Chapter Overview (p. 219)
2 Basic Definitions (p. 220)
3 Option Pricing Using Binomial Trees (p. 222)
4 Option Pricing under the Normal Distribution (p. 230)
5 Allowing for Skewness and Kurtosis (p. 235)
6 Allowing for Dynamic Volatility (p. 239)
7 Implied Volatility Function (IVF) Models (p. 244)
8 Summary (p. 245)
Appendix: The CFG Option Pricing Formula (p. 245)
Further Resources (p. 247)
References (p. 248)
Empirical Exercises (p. 249)
11 Option Risk Management (p. 251)
1 Chapter Overview (p. 251)
2 The Option Delta (p. 252)
3 Portfolio Risk Using Delta (p. 257)
4 The Option Gamma (p. 259)
5 Portfolio Risk Using Gamma (p. 261)
6 Portfolio Risk Using Full Valuation (p. 265)
7 A Simple Example (p. 267)
8 Pitfall in the Delta and Gamma Approaches (p. 271)
9 Summary (p. 273)
Further Resources (p. 273)
References (p. 274)
Empirical Exercises (p. 275)
12 Credit Risk Management (p. 277)
1 Chapter Overview (p. 277)
2 A Brief History of Corporate Defaults (p. 278)
3 Modeling Corporate Default (p. 280)
4 Portfolio Credit Risk (p. 284)
5 Other Aspects of Credit Risk (p. 290)
6 Summary (p. 295)
Further Resources (p. 295)
References (p. 296)
Empirical Exercises (p. 297)
13 Backtesting and Stress Testing (p. 299)
1 Chapter Overview (p. 299)
2 Backtesting VaRs (p. 301)
3 Increasing the Information Set (p. 307)
4 Backtesting Expected Shortfall (p. 308)
5 Backtesting the Entire Distribution (p. 309)
6 Stress Testing (p. 312)
7 Summary (p. 316)
Further Resources (p. 317)
References (p. 318)
Empirical Exercises (p. 319)
Index (p. 321)

Author notes provided by Syndetics

Peter Christoffersen is the TMX Chair in Capital Markets and a Fellow of the Bank of Canada. He publishes in empirical asset pricing and financial econometrics and is the author of Elements of Financial Risk Management. He serves as an Associate Editor of the Journal of Derivatives. Peter has won research awards from AIMA Canada and the Q-Group. He previously taught at McGill University and worked at the IMF.