Risk Management: The State of the Art

1. Front Matter

   Pages i-xxi

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2. Identifying, Modeling and Hedging Risks

   1. Front Matter

      Pages 1-1

      PDF

   2. Modeling Liquidity Risk, with Implications for Traditional Market Risk Measurement and Management

      • Anil Bangia, Francis X. Diebold, Til Schuermann, John D. Stroughair

      Pages 3-13

   3. Credit Risk Capital: More than One Way to Guard a Guarantee

      • Paul Kupiec

      Pages 15-25

   4. Qualitative & Quantitative Derivatives Risk Management

      • Emanuel Derman

      Pages 27-34

   5. Remarks on the Legal Risks of Derivatives

      • Thomas A. Russo

      Pages 35-36

   6. The Evolving Market for Catastrophic Event Risk

      • Kenneth Froot

      Pages 37-65

   7. Industrial Risk Management with Weather Derivatives

      • Richard Jefferis

      Pages 67-78

   8. Designing and Pricing New Instruments for Insurance and Weather Risks

      • Joseph B. Cole

      Pages 79-85

   9. Measuring Credit Risk: The Credit Migration Approach Extended for Credit Derivatives

      • Michel Crouhy, John Im, Greg Nudelman

      Pages 87-110

   10. The Y2K Enigma

       • Menachem Brenner, Michel Crouhy, Dan Galai

       Pages 111-119

3. Managing Risk in Financial Institutions

   1. Front Matter

      Pages 121-121

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   2. Payment and Settlement Risks in International Financial Markets

      • Darryll Hendricks

      Pages 123-127

   3. Risk, Regimes, and Overconfidence

      • Mark Kritzman, Kenneth Lowry, Anne-Sophie Van Royen

      Pages 129-144

   4. The Bi-Currency Balance Sheet Model of Latent Currency Risk

      • Anthony C. Morris

      Pages 145-162

   5. Does Contagion Exist?

      • Roberto Rigobon

      Pages 163-166

   6. An Analysis and Critique of the BIS Proposal on Capital Adequacy and Ratings

      • Edward I. Altman, Anthony Saunders

      Pages 167-186

   7. Hedge Fund Transparency is no Silver Bullet!

      • Bruce Brittain

      Pages 187-200

   8. Capital Adequacy in Financial Institutions: Basel Proposals

      • Darryll Hendricks

      Pages 201-205

   9. Risk Management: Where Are We Heading? Where Have We Been?

      • Leslie Rahl

      Pages 207-213

Very often, we associate the dawn of modern financial theory with Harry Markowitz who in the 1950s introduced the formal mathematics of probability theory to the problem of managing risk in an asset portfolio. The 1970s saw the advent of formal models for pricing options and other derivative contracts, whose primary purpose was also financial risk management and hedging. But events in the 1990s made it clear that effective risk management is a critical element for success, and indeed, for long term survival, not only for financial institutions, but also for industrial firms, and even for nonprofit organizations and governmental bodies. These recent events vividly show that the world is filled with all manner of risks, and so risk management must extend far beyond the use of standard derivative instruments in routine hedging applications.
The articles in this volume cover two broad themes. One theme emphasizes methods for identifying, modeling, and hedging specific types of financial and business risks. Articles in this category consider the technology of risk measurement, such as Value at Risk and extreme value theory; new classes of risk, such as liquidity risk; new financial instruments and markets for risk management, such as derivative contracts based on weather and on catastrophic insurance risks; and finally, credit risk, which has become one of the most important areas of practical interest for risk management. The second theme stresses risk management from the perspective of the firm and the financial system as a whole. Articles in this category analyze risk management in the international arena, including payment and settlement risks and sovereign risk pricing, risk management from the regulator's viewpoint, and risk management for financial institutions. The articles in this volume examine the "State of the Art" in risk management from the standpoint of academic researchers, market analysts and practitioners, and government observers.

• Credit Derivatives
• Credit Risk
• Financial Risk Management
• Hedging
• Risk Management
• Risk Measurement
• business
• derivatives
• financial markets
• liquidity
• management
• rating
• value-at-risk

• Stern School of Business, New York University, USA

  Stephen Figlewski, Richard M. Levich

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