Bugár Gyöngyi

Market and Credit Risk Management

Definition of VaR

VaR is the quantile of loss for a given time period associated with a specified level of confidence.1 When we say that the credit risk of a bank with 95 percent confidence is EUR 100 million for a one-month period, we mean that there is a 95 percent probability that the loss from loan defaults will not exceed EUR 100 million in the next month, i.e. only 5 cases out of 100 will have a loss greater than this amount. If we want to estimate the VaR at an even higher level of confidence than the previous one, say 99 percent, we would expect to obtain a number that is by definition higher than (or at most equal to) the previous one, given the same credit market conditions. This is perfectly understandable, because in this case we want to ensure that in 99 out of 100 cases the loss will be less than the value we have predicted (i.e. that only 1 case of loss exceeding this value will occur). The price of increasing the reliability is therefore an increase in the VaR!

Tartalomjegyzék

Market and Credit Risk Management
Copyright Page
Preface
Introduction
chevron_rightThe concept of risk
chevron_rightTypes of financial risk
chevron_rightThe need for risk management
chevron_rightRisk measures
chevron_rightValue-At-Risk (VaR) and its estimation
chevron_rightCoherent risk measures
- How High is the Risk?
- chevron_rightADEH Axioms
Conditional value-at-risk (CVaR)
chevron_rightExpected shortfall (ES) and the Basel framework
- A Milestone in Basel III
- chevron_rightValidation of Internal Market Risk Model
chevron_rightMeasuring credit risk
chevron_rightCopulas as general dependency measures
- Definition of Copula
- chevron_rightSome Notable Copulas
  - Gaussian copula
  - Archimedean Copulas
- Copulas in Risk Modelling
chevron_rightManaging market risk
- chevron_rightInstruments for Managing Interest Rate Risk
  - Forward Rate Agreement (FRA)
  - Interest Rate Swap
- chevron_rightTechniques of Managing Exchange Rate Risk
chevron_rightManaging credit risk with credit derivatives
References

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2023

ISBN: 978 963 454 857 7

Gazdaság

International credit crunch, Mexican peso crisis, Asian crisis, sub-prime mortgage crisis... It is enough to think back to the financial crises of the last few decades to see why risk management is essential in the economy. This book will introduce the reader to the basics of financial risk management and the tools for managing market and credit risk. However, the book is not only for those who are starting to be familiar with risk management. Its middle section, where the author describes the various risk indicators and measures, should also provide interesting information for professionals. Particularly commendable that Gyöngyi Bugár guiding us with thematically structured practical examples through this dynamically evolving field.

Bálint Zsoldos - Credit risk analyst of an international investment bank

Hivatkozás: https://mersz.hu/bugar-market-and-credit-risk-management//

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