Book Description
Designed to form the basis of an undergraduate course in mathematical finance, this book builds on mathematical models of bond and stock prices and covers three major areas of mathematical finance that all have an enormous impact on the way modern financial markets operate, namely: Black-Scholes’ arbitrage pricing of options and other derivative securities; Markowitz portfolio optimization theory and the Capital Asset Pricing Model; and interest rates and their term structure. Assuming only a basic knowledge of probability and calculus, it covers the material in a mathematically rigorous and complete way at a level accessible to second or third year undergraduate students. The text is interspersed with a multitude of worked examples and exercises, so it is ideal for self-study and suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance who needs to understand the underlying theory.
Customer Reviews:
Mathematics for Finance: A useful tool for the unskillled investor.......2007-03-19
I enjoyed reading the book and solving exercises in it. I have a Ph.D.in chemistry and my wife and I did our his and her's MBA in the 1990s. I wanted to learn more concepts in finance and needed an easy entry, something I could enjoy, and without spending much money. The book by Capinski came recommended from a friend who teaches Economics at Cal State. I can speak for myself: I feel reasonably informed and I feel the book gave me concepts I can use to handle my own portfolio.
In the future, this text should be offered with an interactive CD that contains Xls, matrix, calculus, and graphing capabilities so one (I) can visualize the outcomes of proposed solutions.
Incoherent.......2007-01-18
Anyone can scribble a bunch of equations on paper and call it a book. Without sufficient context, they are useless.
Insufficient and disappointing. Not even a good introductury text........2006-05-15
As a graduate student in Financial Engineering I have found this book useless.
The title of the book is "Mathematics for Finance", but can you find in it even an elementary introduction to the stochastic processes? No. Ditto for the Ito's lemma and many other topics. The derivation of the Black Scholes formula is just sketched, and the insight that you can get from it is very limited.
Nevertheless, I wouldn't mind these limitations if this book provided a clear introduction to more advanced topics: unfortunately this book is not good even in that. In comparison to other textbooks the theorems and definitions are convoluted and do not go straight to the point. For example, in Shreve's "Stochastic Calculus for Finance" or Baxter & Rennie "Financial Calculus" the Fundamental Theorem of Asset Pricing is stated in this way: "In a market with risk neutral probability there is no arbitrage". Can you find such a simple and explanatory definition in Capinski's book? Not at all. The theorem at page 83 (you can see it yourself by searching inside the book) basically says the same thing using 8 lines of text and little financial intuition.
The only good thing that I can say about this book is that all exercises are resolved.
Overall, "Mathematics for Finance" has been a big disappointment: it doesn't have either the mathematical depth of Shreve's books or the conciseness in explaining financial concepts of Baxter & Rennie.
Whatever is the level of education that you are pursuing, graduate or undergraduate, I don't see any point in using it.
Great Book for Undergrad Quants.......2005-08-29
Mathematics for Finance (An Introduction to Financial Engineering) is a book intended for undergrad students "IN MATHEMATICS" or other discipline with a relative high mathematical content.
The book assumes some basic notion of Calculus and Probability Theory and it is focused more on the mathematics than in its theory and application of Finance. If you are looking to dwell into the mathematics (Proof of Equations) this is a great book, but if you are looking for a book that is rich in theory and in application then you should consider "Option, Future and Other Derivatives" or "Quantitative Methods for Finance" as an alternative. Both books are "a most" for any finance student and are of great help. Now if you want an introduction into the mathematics behind Finance then this book is a perfect purchase.
Important to state that all the problems presented in this book are solved meaning that it is great for self teaching. Marek Capinsi and Thomas Zastawniak have done a great job on this book.
I gave it four stars, because it has room for impovement.
Joining the chorus.......2005-08-03
I can only echo the other reviewers. As far as I can tell this book has no serious competition. This is an excellent introduction to mathematical finance for those with a solid undergraduate level understanding of higher math but without graduate level exposure. I agree that it is ideal for self study as that is exactly what I am using it for. The price is right especially in contrast with its overpriced brethren. Five stars!
Book Description
This introductory text provides a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice. M. Joshi covers the strengths and weaknesses of such models as stochastic volatility, jump diffusion, and variance gamma, as well as the Black-Scholes. Examples and exercises, with answers, as well as computer projects, challenge the mind and encourage learning how to become a good quantitative analyst.
Customer Reviews:
An excellent starting point. ... .......2007-01-24
This book is excellent for a deeper introductory look at mathematical
finance. It is well-written, and strikes a nice balance
between sophistication and accessiblity. Its companion volume on
C++ development in the context of quantitative finance is also well
worth examining. I look forward to seeing the follow up volume, which
will cover additional, more advanced topics.
Very Good.......2006-11-03
I'm totally satisfied. About the timing of the shipment, to me very quick and about the quality of the product, that was in good condition.
Very useful book.......2006-02-01
This is a great book for those who want to learn quantitative finance, but don't have the benefit of being enrolled in a financial engineering program. It has the advantage of being self-contained and begins instruction from the ground up: you can "cold start" on the subject with this book. Just a basic knowledge of differential equations (non-stochastic) is required.
It is natural to compare Joshi's book with Hull, but I would recommend reading them together as they have complementary strengths. Hull is over-simplified but provides financial intuition and descriptions of real-world practices. However it does not have modern notation. It also does not teach you how to solve actual pricing problems from the mathematical or computational point of view. Joshi's book does all of that and even helps you develop some mathematical intuition for the models. It also has some computing projects in c++ that a student could do.
The real comparison should be with Neftci's mathematical finance book and Baxter and Rennie. I think Joshi's book is much better than either of the two. I could barely read Neftci after a while because of the errors and bad organization. B&R is way too formal in my opinion for such an applied subject. Joshi's book has good notation and organization which builds confidence in the author, plus it is very applied so you feel you are learning something useful. It has none of that lemma-proof style which can be so unappealing to non-pure mathematicians.
If you already know the field.......2005-10-11
If you already know almost everything it is a very good book. No error and the guy knows what he is doing. However, if you know everything, why do you want to buy this book?
Unfortunately, if you do not know everything, the book is very difficult to understand. At a first lecture I never get the point. After reading some others books and implement the problem, I can indeed understand the chapter... but what is the use? Maybe we (the author and me) do not have the same way of thinking...
Another bad point is that there is no implementation. So if you are blocked somewhere you are dead.
Moreover the authors spend 16 chapter of 18 on equities and 2 on interest rate. But this last field correspond to 90% of the market! ...
Well,..., However,... not so bad ... so, 3 stars
This is a highly recommended work for any quant........2005-06-18
As I write this in June of 2005, quantitative finance has grown up. What was once a cross-over subfield of finance with a veneer of mathematics is now a field unto itself, and hence, in the past decade there have been an explosion of books which often replicate or restate what has been said before with little new to add. Also, there remains an unforgiving gap between introductory texts that are too superficial and specialists' mathematics books that are rigorous and difficult works beyond the commitment for mastery of the busy, intelligent, practical front-line quant. In addition, works that were once adequate are now simplistic and under serve their readers by lulling them into false confidence. Into this fray Dr. Mark S. Joshi's "The Concepts and Practice of Mathematical Finance" enters with a modern voice and delivers what previous texts have only promised and failed to. The work lives up to its title by presenting both concepts and practicalities, and makes other works that do neither well obsolete. Those familiar with my other reviews on quantitative finance texts know that I place a premium on clarity, and on this front Joshi deserves six stars, for he is a master of what William Strunk called "the plain style." I am always sensitive to the fact that many of the world's best quants come from nations where English is not the first language. Readers from China, France, Germany, Greece, Italy, Norway, Sweden, Russia and eastern Europe will enjoy Joshi's clarity and find his English easy to follow. It would be impossible to cover everything in quanfin in a single volume, however there is nothing horribly glossed over here and neither is there a single wasted word or equation.
I recommend Amazon review readers refer to the table of contents in the "Look Inside" feature to see what Joshi covers, but my own highlight is how welcome it is that Joshi focuses on risk from the very first word. Since Louis Bachelier risk measurement is what separates quantitative finance from "finance." Other books, including some quantitative finance works, start with cash flows, valuation, and discounting, and only add risk as an antecedent. Joshi correctly emphasizes risk first, last, and always, and for that elevation alone his work deserves five stars. From this foundation Joshi then covers very well pricing methods and arbitrage, simple and high dimensional trees, and the useful shortcuts of Ito calculus that makes tractable Zeno's paradox. Joshi also covers risk neutral and martingale methods, continuous barrier options, multi-look exotic options and incomplete markets and jump processes with an aim of showing these as typical problems for the working quant. Joshi's own references, index, and footnotes testify that by no means is he offering the first, nor the last, word on these knotty subjects, but his treatment is welcome just the same.
The target audience who would benefit from this text over others is four-fold. The primary audience is for first semester students in a graduate financial engineering program, for Joshi's "Concepts and Practice" will be handy throughout his or her studies and career. For those students unsure of their skills and with a limited budget considering between this and an introductory quantitative finance text I recommend Joshi over, say, Wilmott, for this work is more rigorous and in the long run will provide the better value as a practical companion. Within this audience I include professors looking for a high level foundational text for teaching practical risk management and derivatives pricing: this is the book to adopt, yes, even over Hull.
The second audience is for those trained in other science fields: pure mathematics, statistics, physics, etc. who are moving to finance jobs. This volume is an easy "one-stop shop" for you to re-tool your own background towards those topics and techniques used on a quant desk. While by no means covering everything, Joshi speaks your language and after digesting this work all else will fall into place and be understood and used with greater efficiency.
The third and broadest audience is one I am a member of: the already trained and practical "quant." Why should we need this book? My observation is that between reading (for example) Hull and Wilmott, Joshi's "Concepts" unavoidably covers many of the same topics, but also some things they do not and in ways they never could. Joshi is an expert practitioner at the top of his art, and that practical spirit is in every single page. For example, while Hull and Wilmott cover the concept and mathematics of stochastic volatility, Joshi writes from the point of view of the coding quant and discusses the issues of implementation. Joshi's "Concepts and Practice" serves a two fold purpose for a qaunt: it provides an additional voice and explanation of inescapably fundamental material, while bridging the gap of technical deployment for front line practitioners. This is not to say that Joshi offers us up a cookbook, for by no means is this such. Anyone who thinks they can simply buy this book and in a sleepy afternoon plug away code and technique and be done is missing the point: for this is a teaching text. Moreover, each house and set of problems and instruments and structured products to offer are different, to say nothing of the platforms one will be working on. That is why they call it "work." Therefore the practical quant should look to this text as a reference guidebook in a tool box.
As a fourth audience I cautiously recommend this book for those who are going into exotic product sales, but only those who have a good grounding in upper level calculus, linear and matrix algebra, time series analysis, and trees. Why? Simply put, you will be offering products built by quants who simply assume the knowledge in this book is a given. In addition, your better clients will (or should) have quants speaking this language, and the greater your own understanding of the concerns of your team and your clients the better your sales. If this work is too rigorous, then Wilmott's "Introduction to Quantitative Finance" quickly followed by Joshi's "Concepts and Techniques" is the course to follow.
Who is this work not for? Here are some tests. If you are a quant who can type at five lines of code a minute and can read Shreve and Karatzas drinking beer, then this work is too redundant for you. On my desk is a paper on a stochastic process with drift and viscosity under regime switching. If you are reading the same journal, then this work is too simple for you. If you have no idea what I've written about in the past three sentences, then this work is too hard for you.
In summary, Dr. Mark Joshi advances his excellent reputation as an intelligent, practical, and generous quant in offering "The Concepts and Practice of Mathematical Finance" and I recommend this book's wide adoption in graduate programs and its addition to reference libraries.
Book Description
The Das Swaps & Financial Derivatives Library – Third Edition Revised is the successor to Swaps & Financial Derivatives, which was first published in 1989 (as Swap Financing). A second edition was published in 1994 (as Swaps & Financial Derivatives – Second Edition (in most of the world) and Swaps & Derivative Financing – Second Edition (in the USA). The changes in the market since the publication of the second edition have necessitated this third edition.
The Das Swaps & Financial Derivatives Library – Third Edition Revised is a four-volume set that incorporates extensive new material in all sections to update existing areas of coverage. In addition, several new chapters covering areas of market development have been included. This has resulted in a significant expansion in the size of the text. The four volumes in this set are:
Derivative Products & Pricing
Risk Management
Structured Products Volume 1: Exotic Options, Interest Rates & Currency
Structured Products Volume 2: Equity, Commodity, Credit & New Markets
Average customer rating:
- An excellent crash course in OOP
- Benchmark book on Computational Finance
- Full of OOP Wisdom!
- depends what you are looking at
- From particular to general: design patterns in c++
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C++ Design Patterns and Derivatives Pricing (Mathematics, Finance and Risk)
Mark S. Joshi
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Similar Items:
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The Concepts and Practice of Mathematical Finance (Mathematics, Finance and Risk)
-
Financial Instrument Pricing Using C++ (The Wiley Finance Series)
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Heard on the Street: Quantitative Questions from Wall Street Job Interviews
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Options, Futures and Other Derivatives (6th Edition)
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Modeling Derivatives in C++ (Wiley Finance)
ASIN: 0521832357 |
Book Description
Combining mathematical finance with C++ and object-oriented programming (00P), M. Joshi demonstrates the relevance and use of OOP in financial mathematics by describing how to use price derivatives to obtain reusable and extensible code. A large part of the book is devoted to designing reusable components which are then combined to build a Monte Carlo pricer for exotic equity derivatives. Readers knowing the basics of C++ and mathematical finance, but are unclear how to use OOP to implement models, will welcome this analysis.
Customer Reviews:
An excellent crash course in OOP.......2007-10-04
Do not be put off by the rich price/page-count multiple: it will take a lot of time and work to go through the book's 200 pages, and you won't regret the effort. You may be interested to know that Mark Joshi has devoted a section of his site to the book, complete with a forum for readers. Two warnings on what this book is not:
(1) It is not one's introduction to C++; you risk a brain aneurysm trying to learn C++ on the go.
(2) It's not a collection of ready-to-use code. (The reviewer complaining about lack of coverage of IR models misses the point completely).
Instead, it sets out to demonstrate why you need OOP, and does that in the context of a single, progressively expanding, exercise.
Benchmark book on Computational Finance.......2006-06-26
Mark has produced a marvel. The book introduces practical C++ programming with such spontaneity. The author sets the pitch beautifully with a step-by-step introduction of the need of advanced computing. It handholds reader as it expands from basic oops programming to designs and patterns in computing while mentioning rare tips on efficiency requirements when pricing derivatives versus robust programming.
The book is elegantly written with precise explanations and very concise (and very practical). It comes with the code as well.
As the other reviewer pointed out, the book has written for specific purpose and the focus is not diluted throughout (for example, it did not expand on quantitative issues which could have taken the book out of bounds which is a very big plus point). Even though the book is concise, it would require quite a lot of time to get the best out of it, because it is very dense on issues.
A must have book for anyone who is interested in Computational Finance (Quantitative Analyst/Developers, Financial Engineers, and Risk Managers). It filled a very big gap in this arena.
And this is written by a Practitioner Quant. Very well done Mark.
Full of OOP Wisdom!.......2005-10-15
In terms of programming concepts and OOP design for financial engineering, this book has no equals. We have Daniel Duffy's Financial Instrument Pricing Using C++, but it takes a different approach (i.e. generic programming based in STL). All through the book, the author introduces improvements sequentially and doesn't start from the best design from the outset in order to demonstrate the flaws of a less general/useful/reusable program. In this sense, this is mainly a conceptual book, not an example book. For example, it deals with and develops vanilla-option pricing using Monte Carlo simulation over the first five chapters. A reader looking for a cookbook that gives programs to implement a large number of financial-derivative models would be well-advised to look elsewhere (e.g. Justin London's Modeling Derivatives in C++). However, someone looking for OOP wisdom would be generously rewarded for buying this book.
depends what you are looking at.......2005-10-13
This small book (192 pages) is pretty expensive but if it brings you a lot it is OK.
It depends what you are looking at:
If you want a book "how to write a clean C++ program", this book is for you. The authors enhance the formal (and correct) writing you should have when coding.
If you are interested in understand and solve the various problems you encounter implementing derivatives with numerous examples, it is not the good book for you. There are few programs so few examples and solutions. Moreover I have to dig in his classes to understand them. I would have preferred static functions, even if I have to do a little work to implement them in my library.
However from my point of view, the biggest reproach to this book is that it does not treat the interest rate derivatives at all, which is really problematic.
So it was not really interesting. The Clewlow was much better for me.
From particular to general: design patterns in c++.......2005-08-23
In principle, it seems that this book is a very specialized one: design patterns in derivatives pricing. However, Mark Joshi has been able to give ideas that are generalizable to many other fields. For example, I have developed a trading simulator in c++ using several of the ideas of the book. The ideas in the book are so general, that very often one can do simply a copy and paste and just change the names of the classes and variables.
The only complaint to the writer is that he does not supply the answers to the questions of the book. This is standard practice in academia (and there is a good reason for it), but this book is designed mainly for practitioners, that probably do not have too much time to solve difficult questions.
The writer is widely known in forums like nuclearphynance and wilmott for his deep comments about derivatives pricing.
Disclosure: I only know Mark Joshi because I have sent him an email with some questions about the book. He very kindly has replied to me. I do not have any other kind of relation with him.
Book Description
The essential premise of this book is that theory and practice are equally important in describing financial modeling. In it the authors try to strike a balance in their discussions between theories that provide foundations for financial models and the institutional details that provide the context for applications of the models. The book presents the financial models of stock and bond options, exotic options, investment grade and high-yield bonds, convertible bonds, mortgage-backed securities, liabilities of financial institutions -- the business model and the corporate model. It also describes the applications of the models to corporate finance. Furthermore, it relates the models to financial statements, risk management for an enterprise, and asset/liability management with illiquid instruments. The financial models are progressively presented from option pricing in the securities markets to firm valuation in corporate finance, following a format to emphasize the three aspects of a model: the set of assumptions, the model specification, and the model applications. Generally, financial modeling books segment the world of finance as "investments," "financial institutions," "corporate finance," and "securities analysis," and in so doing they rarely emphasize the relationships between the subjects. This unique book successfully ties the thought processes and applications of the financial models together and describes them as one process that provides business solutions. Created as a companion website to the book readers can visit www.thomasho.com to gain deeper understanding of the book's financial models. Interested readers can build and test the models described in the book using Excel, and they can submit their models to the site. Readers can also use the site's forum to discuss the models and can browse server based models to gain insights into the applications of the models. For those using the book in meetings or class settings the site provides Power Point descriptions of the chapters. Students can use available question banks on the chapters for studying.
Customer Reviews:
Not recommended.......2007-09-17
"Hodge-podge" is the first term that comes to mind after reading this book. The breadth of topics is notable, but the material itself is far from satisfactory as applied to the real world. If someone offers to pay you to read this book, it would be worth reading. Also, please note that several five-star reviews were written professionally for promotional purposes.
Much worse than Hull's book.......2005-05-20
Ho and Lee's book is not bad, but not as good as Hull's book. First, this book tries to include everything, making it not easy to learn for beginners. Second, the definition in this book is not very clear as hull's book. Third, after reading the book, I really don't know what are models for and how to implement these models; hence, I still have to refer these model from Hull's book.
Excellent Book.......2004-10-07
The field of quantitative financial modeling, young as it is, has seen a massive explosion of published books in recent times. While it may appear that there is now a wealth of literature on financial modeling out there, the sad reality is it has become very difficult to find well-written comprehensive books. Dr T. S. Y. Ho and Prof S. B. Lee's book is in my opinion the most comprehsive book on financial modeling since J. Hull's book. Their book even takes a big step further than John Hull in setting a mathematical framework for consistent valuation of derivatives, corporate liabilities and valuation of firms (Corporate Finance).
This is a an excellent book for researchers, practitioners and students alike. Readers will benefit from a wealth of academic and industrial experience of the two authors, which is very well portrayed in every section of the book. In addition to the book they provide a free interactive website (www.thomasho.com) where one can be more intimate with the financial models discussed in book. One may recall that Dr Ho and Prof Lee are the authors of the Ho-Lee model.
Fake reviewers.......2004-07-17
I am afraid that the 3 reviewrs before me are the same person.
Amazon makes it quite easy for promotional wizards to do that so sales can be increased.
So far there is not even one review that tackes or critisizes this book. Are we all that perfect or should we become a victims of made up book?
Brilliant educational project.......2004-04-04
Most textbooks on financial modeling are devoted to describing specific models, such as those for stocks, bonds, or options, or to their specific applications such as arbitrage trading and portfolio management. Few books describe the financial principles behind the models and tie the models to business solutions.
The Oxford Guide to Financial Modeling by Thomas S.Y. Ho and Sang Bin Lee (yes, the authors of the Ho-Lee model, the first arbitrage-free interest rate model) successfully ties the thought processes and applications of the financial models together and describes them as one process which provides business solutions. The authors very ably explain all the models used in finance, take the financial theory and modeling to the next level and develop a business model framework that integrate the fields of corporate finance, fixed income, derivatives, and Asset & Liability management.
Each chapter begins by introducing a practical problem. The financial models that provide solutions to the problem are then described. The chapter concludes with how the models can be applied. Because of the nature of the material on financial models, the book presents many results as mathematical formulations, yet the text is very enjoyable as the more rigorous mathematical derivations are deferred to the appendices and to the epilogue.
What really makes The Oxford Guide to Financial Modeling a brilliant educational project and just not another excellent textbook is the companion web site that serves as an interactive workbook designed specifically for the book. The site is designed to further enhance understanding of the use and applications of the models referred to in the book and it is accessible free of charge.
Book Description
Robert Whaley has more than twenty-five years of experience in the world of finance, and with this book he shares his hard-won knowledge in the field of derivatives with you. Divided into ten information-packed parts, Derivatives shows you how this financial tool can be used in practice to create risk management, valuation, and investment solutions that are appropriate for a variety of market situations.
Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.
Average customer rating:
- Good introduction to VaR
- Best intro to VAR
- A Great Introduction to VaR
- An excellent introduction to VaR
- Outstanding and practical
|
Value At Risk: The New Benchmark for Controlling Derivative Risk
Philippe Jorion
Manufacturer: Irwin Professional Pub
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ASIN: 0786308486 |
Book Description
Do you take the chance of creating and amplifying risk when you are simply attempting to understand and control risk? In Phillippe Jorion's Value at Risk, learn the specifics of the value-at-risk system, the risk management program that today's leading banks and financial firms use to calculate and track financial risk. Value at Risk is the first book to thoroughly explain this increasingly influential system, which allows you to gauge financial risks and take proactive steps to control those risks.
Customer Reviews:
Good introduction to VaR.......2007-09-18
This is one of the first books about VaR and so became widely used and read by everyone interested in market risk management. Good as an introduction and to have a good overview of VaR but if you need more detailed information this book will not give you the answers.
Best intro to VAR.......2000-09-02
Cannot think of any other book that gives you the basics and beyond of VAR. As an MBA student I liked most the practical examples. Mathematical stuff is kept to a minimum, even though it can be sometimes quite demanding. Jorion is one of the laeding academics on VAR. He "defends" the properties of VAR very well after some criticism on VAR (see Nassim Taleb's web page).
A Great Introduction to VaR.......2000-07-20
Dr. Jorion's book formally introduced the concept of VaR to me several years ago. It's written so that a novice in risk management can understand the concepts with ease.
A great book.
An excellent introduction to VaR.......1999-07-01
This provides an excellent overview and introduction to VaR and issues surrounding it. A must read for any body involved with financial risk management.
Outstanding and practical.......1999-03-30
Jorian clearly has practiced before he began to preach. I found his work to be essential in designing and implementing a var methodology for the electricity forward market. The examples he gives of the failures to measure and control risk are illuminating and entertaining. I have recommended the book to others and they have agreed that the book is excellent.
Book Description
The first full analysis of the latest advances in managing credit risk.
"Against a backdrop of radical industry evolution, the authors of Managing Credit Risk: The Next Great Financial Challenge provide a concise and practical overview of these dramatic market and technical developments in a book which is destined to become a standard reference in the field." -Thomas C. Wilson, Partner, McKinsey & Company, Inc.
"Managing Credit Risk is an outstanding intellectual achievement. The authors have provided investors a comprehensive view of the state of credit analysis at the end of the millennium." -Martin S. Fridson, Financial Analysts Journal.
"This book provides a comprehensive review of credit risk management that should be compulsory reading for not only those who are responsible for such risk but also for financial analysts and investors. An important addition to a significant but neglected subject." -B.J. Ranson, Senior Vice-President, Portfolio Management, Bank of Montreal.
The phenomenal growth of the credit markets has spawned a powerful array of new instruments for managing credit risk, but until now there has been no single source of information and commentary on them. In Managing Credit Risk, three highly regarded professionals in the field have-for the first time-gathered state-of-the-art information on the tools, techniques, and vehicles available today for managing credit risk. Throughout the book they emphasize the actual practice of managing credit risk, and draw on the experience of leading experts who have successfully implemented credit risk solutions.
Starting with a lucid analysis of recent sweeping changes in the U.S. and global financial markets, this comprehensive resource documents the credit explosion and its remarkable opportunities-as well as its potentially devastating dangers. Analyzing the problems that have occurred during its growth period-S&L failures, business failures, bond and loan defaults, derivatives debacles-and the solutions that have enabled the credit market to continue expanding, Managing Credit Risk examines the major players and institutional settings for credit risk, including banks, insurance companies, pension funds, exchanges, clearinghouses, and rating agencies. By carefully delineating the different perspectives of each of these groups with respect to credit risk, this unique resource offers a comprehensive guide to the rapidly changing marketplace for credit products.
Managing Credit Risk describes all the major credit risk management tools with regard to their strengths and weaknesses, their fitness to specific financial situations, and their effectiveness. The instruments covered in each of these detailed sections include: credit risk models based on accounting data and market values; models based on stock price; consumer finance models; models for small business; models for real estate, emerging market corporations, and financial institutions; country risk models; and more. There is an important analysis of default results on corporate bonds and loans, and credit rating migration. In all cases, the authors emphasize that success will go to those firms that employ the right tools and create the right kind of risk culture within their organizations. A strong concluding chapter integrates emerging trends in the financial markets with the new methods in the context of the overall credit environment.
Concise, authoritative, and lucidly written, Managing Credit Risk is essential reading for bankers, regulators, and financial market professionals who face the great new challenges-and promising rewards-of credit risk management.
Customer Reviews:
Executive Summary on Managing Credit Risk.......2003-08-21
This book is good overview on current status of the credit risk management. I recommend it to those who need to get quick overview on what it takes. It compares classic credit analysis with new approaches, explains the credit culture etc. However this can not be used as a single source of information. You will need additional books. Do not expect to get mathematical formulas in this book. There is only very few of them, which is benefitial here, because the book is easy to understand. What you will get is a vision on how the credit risk should be managed. If you seek specific advices on how to manage credit risk than there are better books like Managing Bank Risk: An Introduction to Broad-Base Credit Engineering from Morton Glanz.
Too good to be true?.......2003-08-04
While the recent comment "Comprehensive Resource on Credit Risk Management" is very good in many ways, I wish it explains more in the low yielding instruments, like the wit it shows in the treatment of high yield.
Innovative approach to Managing credit risks.......2002-02-18
This book popularises the new portfolio management approach to managing loan portfolios.The attempt is to mark the value of loans to market. This assumes a vibrant market for securitised loans , strips etc.It is a very good introductory book an the subject which is now evolving.It should be read by regulators and those who have supervisory roles.It is easy reading not much encumbered by obscure mathematical equations
This is good value for money and should be on every credit administrator's bookshelf
A Foot in the Door.......2001-07-07
The authors make for a particularly impressive team of credit risk experts and Professor Altman in particular is a global authority on the subject. The book does not disappoint, and provides a first-rate overview of the field as it is currently emerging. Of particular interest to this reviewer were the chapters on the new credit risk models such as CreditMetrics, KMV and their brethren. There are also some informative chapters on default and recovery analysis and credit migration. However, like so many financial books on the market these days, there is little guidance on the practical implementation of the various approaches described in the text. Overall, "Managing Credit Risk" is a very useful work but for this kind of money I would have expected more than just a foot in the door!
Managing Credit Risk is a fabulous book........1999-11-15
Managing Credit Risk is an outstanding work of scholarship and a truly fabulous book. As a working credit analyst in the field the authors characterize as "classic credit analysis," I felt the need to become conversant with the various quantitative approaches to managing credit risk, (especially since the ultimate goal of the quantitative modelers is to put me out of work). The book served my needs precisely, by introducing all of the relevant models in a concise format with easy-to-understand commentary on the strengths and weaknesses of the models. The clear, qualitative, conceptual explanations are supported by quantitative examples sufficient to satisfy most numerically minded readers, but even those who shy away from numbers will find the quantitative examples easy to follow. The book has served me very well by enabling me to discuss the assessment and deployment of quantitative models on an even footing with professional risk managers and the rocket scientists who are engaged in developing these models. Although finance professionals obviously will find the book of great value, I also believe that readers who enjoyed Peter Bernstein's Against the Gods will find that Managing Credit Risk provides a concrete account of the current state of humanity's struggle to understand and control risk.
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Managing Interest Rate Risk: Using Financial Derivatives (Institute of Internal Auditors Risk Management Series)
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Managing Currency Risk: Using Financial Derivatives
ASIN: 0471485497 |
Book Description
As with previous titles in the IIA (Institute of Internal Auditors) series this is a clear and practical guide to a subject of key importance to financial managers. Whether borrowing, investing, saving or trading, a company will always have to take into account the cost of capital and therefore interest rate risk. The highly accessible style explains everything from the basic principles through to the techniques allowing those without prior knowledge to understand the nature and use of a variety of financial tools, including derivative instruments. This is the third part of the trilogy on market risk, the previous two being Managing Currency Risk and Managing Commodity Risk.
Book Description
Credit Derivatives explains the major types of credit derivatives and their unique features, illustrating how they work in the real world through numerous examples. You will learn the key skill of pricing credit derivatives and the factors that must be taken into account, including time to maturity, probability of default, and expected recovery value.
Customer Reviews:
A fine introduction.......2007-02-18
A credit derivative is a contract that transfers the risk and return of an asset from one counterparty to another. This is done without transferring ownership of the underlying asset. In comparison to other types of derivatives, credit derivatives are relatively new, and like any new financial instrument their use and analysis has proven to be challenging, both from a technical and regulatory standpoint. This book gives an overview of credit derivatives that can be read by anyone who has an interest in learning about them. Those new to credit derivatives, such as this reviewer, will find the reading straightforward, with appropriate mathematical background in linear algebra, probability and statistics, and time series analysis assumed. The use of credit derivatives is accelerating in many of the major institutions all over the world. A familiarity with them is thus required for all who are responsible for the management of risk or financial analysts who need to understand the pricing mechanisms involved.
The book is divided into three parts, with the first giving a detailed outline of the most important types of credit derivatives. These include asset swaps, credit default swaps, credit spread forwards, total return swaps, basket swaps, and credit spread options. In an asset swap a synthetic asset is created in order to satisfy the need of an investor for a cash flow profile that does not exist in the marketplace. As an example, one can change an instrument paying only fixed rates to one that has floating rates and vice versa. In a credit default swap, as the name implies, one is interested in hedging against default events, and this is done by transferring credit risk of a third party from one party to another. The lender is one of the parties, who is confronted with credit risk from the third party. The other is the counterparty, who agrees to an insurance premium with regular periodic payments. The default of the third party will require the counterparty to purchase from the insured party the asset that has defaulted. In a credit spread forward a single cash flow at a future time is exchanged based on the difference between the credit spread on the date of trading and the market spread at maturity, or alternatively on the difference between two risky spreads. In a total return swap, an agreement is reached between two parties wherein they agree to swap a periodic payment for the duration of the agreement. One of the parties makes payments based upon the total return of a specified reference asset. The other party agrees to make fixed or floating payments to the other. For a basket swap, one pools a number of reference credits into a single structure. There will be a payment to the buyer if a credit defaults, but will not receive a payment if the reference credit merely deteriorates. In a credit spread option, as the name implies, the buyer has the option to receive a payment from the seller if the spread of a particular reference credit increases beyond the strike level for a put option, or decreases within the strike level for a call option. They buyer pays the seller a premium for this option.
The authors discuss other variations of credit derivatives and how certain financial instruments not really classified as credit derivatives can be constructed from them. They also remark on the value of technology in fine-tuning the marketing of credit derivatives, particularly in the over the counter (OTC) trading of these financial instruments. Short commentary is also made on the regulatory environment faced by financial institutions, particularly banks, that desire to use credit derivatives to mitigate risk. The authors are aware that a careless use of credit derivatives can compound the risk, rather than mitigate it.
It is the mathematical formalism behind the pricing and analysis of credit derivatives that is of main interest to those who work in financial engineering. The second part of this book discusses some of this formalism, with emphasis of course on risk modeling. The authors define credit risk as the potential loss that may occur if an obligor is unable to make contractual payments, and consists of three components, namely the probability of default, the recovery rate, and credit risk exposure. After an elementary discussion of risk modeling, wherein some of the standard mathematical tools are discussed, along with the data requirements needed for successful modeling (some of these being quite formidable). For analysts and modelers, this part of the book will of course be the most useful. The mathematical tools used are very well known and there are not beyond the reach of the typical analyst, as compared to more academic approaches to the subject. Because of the background of the authors, the Moody KMV software is emphasized throughout the analysis. In their discussions of the modeling of credit default risk, the reader can clearly see the importance of comparing the market value of assets with the book value of liabilities, and the lack of empirical support for the idea that firms will default when the value of their assets reaches the book value of their total liabilities. Also interesting is the discussion of the Vasicek-Kealhofer model, and its use in calculating the expected default frequency.
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