Auer Hands-On Value-at-Risk and Expected Shortfall

A Practical Primer
1. Auflage 2018
ISBN: 978-3-319-72320-4
Verlag: Springer Nature Switzerland
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 174 Seiten

Reihe: Management for Professionals

This book describes a maximally simple market risk model that is still practical and main risk measures like the value-at-risk and the expected shortfall. It outlines the model's (i) underlying math, (ii) daily operation, and (iii) implementation, while stripping away statistical overhead to keep the concepts accessible. The author selects and weighs the various model features, motivating the choices under real-world constraints, and addresses the evermore important handling of regulatory requirements. The book targets not only practitioners new to the field but also experienced market risk operators by suggesting useful data analysis procedures and implementation details. It furthermore addresses market risk consumers such as managers, traders, and compliance officers by making the model behavior intuitively transparent.

Martin Auer is senior consultant in the areas of quantitative finance, market and credit risk, and IT, working for the likes of Raiffeisen Bank International, Kommunalkredit, and T-Systems in Vienna, and for Bank of America in New York. He holds degrees in computer science, mathematics, and mathematics of finance from Vienna University of Technology, University of Vienna, and Columbia University. 

Autoren/Hrsg.

Auer, Martin

Inhaltsverzeichnis

1;Endorsements;6
2;Preface;8
3;Acknowledgments;10
4;Contents;11
5;List of Figures;14
6;1 Introduction;16
7;2 Motivation;18
8;Part I Measures;25
8.1;3 Basic Terms and Notation;26
8.2;4 Historical Value-at-Risk;33
8.3;5 Sensitivities;39
8.4;6 Stress Tests;44
8.5;7 Analytical Value-at-Risk;46
8.5.1;7.1 Approximate VaR;46
8.5.2;7.2 VaR-Sensitivity;48
8.5.3;7.3 VaR-Contribution;49
8.6;8 Expected Shortfall;50
8.7;9 Model Choices;52
8.8;10 A Monte Carlo Modification;60
8.9;11 Support Measures;64
9;Part II Operations;70
9.1;12 Properties of VaR;71
9.2;13 Properties of ES;75
9.3;14 VaR Noise;79
9.4;15 Backtesting;83
9.5;16 Distribution Tests;87
9.6;17 Nine to Five;93
9.6.1;17.1 Why Did My VaR Increase?;93
9.6.2;17.2 How Will the VaR Change?;96
9.6.3;17.3 How Good Is the VaR Model Anyway?;97
9.6.4;17.4 Hmm, How Did the Parameters Materialize?;98
9.6.5;17.5 Can You Validate Your Model?;100
9.6.6;17.6 What About the Kurtosis?;101
10;Part III Setup;107
10.1;18 Context;108
10.2;19 Scope and Workflow;111
10.2.1;19.1 VaR Flow;111
10.2.2;19.2 Backtesting Flow;113
10.2.3;19.3 Sensitivity Flow;114
10.2.4;19.4 Stress Test and Stressed VaR Flow;114
10.2.5;19.5 Partial VaR Flow;115
10.2.6;19.6 Naming;115
10.2.7;19.7 Encapsulation;116
10.3;20 Implementation;117
10.3.1;20.1 Generating Scenarios;117
10.3.2;20.2 Computing PnLs;119
10.3.3;20.3 Aggregating;120
10.3.4;20.4 Accessing the Database;121
10.3.5;20.5 Coding Guidelines;121
10.3.6;20.6 File Formats;122
10.3.7;20.7 Optimizations;126
10.3.8;20.8 Metal;128
11;Part IV Wrap-Up;129
11.1;21 Conclusion;130
12;A Statistics 101;131
12.1;A.1 Random Variables and Probabilities;131
12.2;A.2 Expected Value;134
12.3;A.3 Variance and Standard Deviation;136
12.4;A.4 Sample Estimates;137
12.5;A.5 Kurtosis;139
12.6;A.6 Multiple Random Variables and Covariance;140
12.7;A.7 Distribution, Inverse, and Quantiles;143
12.8;A.8 Conditional Expectation;145
12.9;A.9 The Normal Distribution;145
12.10;A.10 Sums of Randoms;147
12.11;A.11 Some Densities for the Road (to Independence);151
13;B Pricing;156
13.1;B.1 Trades as Asset Exchanges;157
13.2;B.2 Prices as Ratios;159
13.3;B.3 Prices of Future Delivery;159
13.4;B.4 Prices as Expectations;161
13.5;B.5 The Call Option;163
13.6;B.6 Views on Probabilities;164
14;C Further Reading;168
15;References;170
16;Index;172