Risk Measures

[Flex]

Hi,

I would like to get an overview over risk measuring, the most commonly used risk measures and their application to real data.

I have done a bit research but it's very hard to judge which books are worth reading.

So, could you guys please tell which books you would recommend.

What about the 3 books in the "master reading list for quants":

1. Market Risk Analysis (4 Volume Boxset) by Carol Alexander
2. Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk by Philippe Jorion
3. Risk Management and Financial Institutions (2nd Edition) by John Hull

I am thankful for every input.

Cheers!

 

[Tsotne]

Hi @Flex

I have 2 semesters experience with Philippe Jorion's Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk and I think nobody on earth who has read it will disagree that this book needs a huge modification in every concept:

1) Explanatory side. Not fully examined every aspect which is mentioned and moreover, you'll be surprise to discover some end-of-chapter problems stated which have not been mentioned in that chapter. For example calculating max-VAR.

2) Completeness of the book. The book should contain all the relevant information needed to study that particular chapter (some of them may be not included) but this book directs you to read some articles which you have to purchase and there are many of such ones.

3) There are a few end-of-chapter exercises which I think doesn't at all cover the materials discussed(in idea). From previous edition of the book which couldn't withstand any criticism there are quite a lot of modifications and improvements but professors argue that the author has just collected some articles and published as a book.

That's my opinion which is shared by professors of my university.

P.S. If you just in case decide and begin to study this book feel free to let me know and I'll give you many materials you will need to study and you'll be required to search or buy in that book.

Best
Tsotne

 

[Ken Abbott]

I've been teaching risk courses for over 10 years and I have yet to find a textbook I like. Basel docs and Riskmetrics can provide the basics. Look for academic papers after that.

 

[Tsotne]

I mentioned the downsides of the book I am aware of. Just saw Risk Management and Financial Institutions (2nd Edition) by John Hull. I also know this book. It is a general risk descriptions. Includes derivatives, interest rate risk discussion, etc. but the disadvantage is that it is more general in nature. It doesn't cover pure mathematical concepts for risk management, so for this purpose it is just a "good read" out of class I think. From the options you provided I would personally choose 1 one which looks most impressive.

 

[alain]

I don't like Jorion's book. When it comes to Value-at-Risk, this is the book that I like:
Value at Risk: Theory and Practice

 

[kinderchocolate]

I have all the following books. I personally don't like Jorion's book. Its contents are out-of-dated and explainations is not very complete. For example, the book just states that the change of portfolio value is due to delta and gamma, but it doesn't state the exact relationships, ie. it is due to Taylor expanisons.

 

[Tsotne]

How about the first one?? Market Risk Analysis (4 Volume Boxset) by Carol Alexander. This reflects the general risks I think also not concentrated to pure VAR. I have learned Jorion's VAR but it really is not a good book.

 

[Tsotne]

I have all the following books. I personally don't like Jorion's book. Its contents are out-of-dated and explainations is not very complete. For example, the book just states that the change of portfolio value is due to delta and gamma, but it doesn't state the exact relationships, ie. it is due to Taylor expanisons.

BTW, I don't think they are outdated, they are not explained fully and also this book lacks many other methods deemed important in VAR.

 

[MiloRambaldi]

I don't like Jorion's book. When it comes to Value-at-Risk, this is the book that I like:
Value at Risk: Theory and Practice

I've seen references online to a second edition published in 2009, but it is not available anywhere.

Does anyone know what happened?

 

[alain]

I don't think there is a second edition. This is from Mr. Holton's website:

http://glynholton.com/2007/07/more-questions-than-answers/

This book is really really good. I have a copy that I bought it used after years of chasing it.

 

[Flex]

Thanks for your input guys!
I will try to get the recommended books!

Beyond VaR and Expected Shortfall, what are the most commonly used risk measures today?
Is the superhedgingprice often used by practioners? What about the entropic risk measures?

 

[Tsotne]

VAR is most commonly used as well as accepted as a benchmark for BASEL regulations. The theories in VAR are still under modification and this direction of risk measures (VAR) is not fully completed as an "independent science" yet.

 

[Tsotne]

I got all the articles now for Jorion's VAR and gonna read them. If needed I can share them. Methods are not that old and outdated. Just not explained fully but after completing those articles it's ok.

 

[Tsotne]

@Flex Notify me if you got an e-mail. If not I'll send them again.