Financial Risk Management : From Metrics to Human Conduct 9781119885313, 9781119885290, 9781119885306

Table of contents :
Cover
Table of Contents
Title Page
Copyright
Foreword
Acknowledgements
List of Acronyms and Symbols
Introduction
NOTE
PART One: Navigating Banking Regulation
CHAPTER 1: A Brief History of the Basel Framework
NOTES
CHAPTER 2: The Basel I Regulatory Framework and the Cooke Ratio
CAPITAL ADEQUACY
WORKED EXAMPLE 1: COMPUTATION OF THE COOKE RATIO
NOTES
CHAPTER 3: Amendment to the Basel I Framework to Incorporate Market Risks
THE ADVENT OF MARKET RISK
COMPUTING THE CAPITAL CHARGE FOR CREDIT AND MARKET RISKS
WORKED EXAMPLE 2: COMPUTATION OF THE EXTENDED COOKE RATIO
NOTES
CHAPTER 4: Implementation of the Basel II Framework
THE THREE PILLARS
WORKED EXAMPLE 3: COMPUTATION OF THE MCDONOUGH SOLVENCY RATIO
THE INTERNAL RATINGS‐BASED APPROACH TO CREDIT RISK
CHAPTER 5: A Guided Tour of the Basel III Framework
THE RATIONALE FOR A NEW REGULATORY FRAMEWORK
STRENGTHENING THE REGULATORY CAPITAL FRAMEWORK
A NEW GLOBAL LIQUIDITY STANDARD
SUPPLEMENTING THE RISK‐BASED CAPITAL REQUIREMENT WITH A LEVERAGE RATIO
CAPITAL BUFFERS
COPING WITH TAIL RISK
CHAPTER 6: Climate‐Related Financial Risks
NOTE
PART Two: The Financial Risk Measurement Landscape
CHAPTER 7: Historical Approach to Risk
STEP‐BY‐STEP CALCULATION OF HISTORICAL VAR
UNDERSTANDING A VAR RESULT
THE WORST MISTAKE YOU CAN MAKE
DO YOU SPEAK MARK‐TO‐MARKET?
BEYOND VAR
CHAPTER 8: The Gaussian Framework
THE CORE EQUATION
THE COVARIANCE MATRIX
THE QUANTILE OF THE STANDARDIZED GAUSSIAN DISTRIBUTION
THE EXPECTED RETURN TERM
THE GAUSSIAN VAR
THE GAUSSIAN ES
CHAPTER 9: A Brief Overview of Monte Carlo Simulation
NOTES
CHAPTER 10: Risk Contribution
RISK DECOMPOSITION OF THE GAUSSIAN VAR
RISK DECOMPOSITION OF THE GAUSSIAN ES
RISK DECOMPOSITION OF THE HISTORICAL VAR
RISK DECOMPOSITION OF THE HISTORICAL ES
CHAPTER 11: Shortcomings of Risk Metrics
THE PROBLEM OF STATIONARITY
VOLATILITY MODELLING
THE GAUSSIAN ASSUMPTION IS SEDUCTIVE BUT DANGEROUS
TAMING FAT TAILS AND SKEWNESS
CHAPTER 12: Ex‐Post Evaluation of a Risk Model: Backtesting
CHAPTER 13: A Forward‐Looking Evaluation of Risk: Stress Testing
THE RETURN PERIOD
HISTORICAL STRESS SCENARIOS
PART Three: Getting Conduct Risk to Scale
CHAPTER 14: The Big Picture of Conduct Risk
CHAPTER 15: Markers of Conduct Risk
NOTES
CHAPTER 16: Worked Example 7: Building a Conduct Risk Score
MATCHING RISK MARKERS WITH CONDUCT RISK PILLARS
SETTING THRESHOLDS
CALCULATION AND CUSTOMIZATION OF THE CRS
NOTES
CHAPTER 17: Fostering a Culture of Appropriate Conduct Outcomes
CONDUCT RISK CULTURE AND BEHAVIOURS
CLARIFYING GOOD AND BAD BEHAVIOURS
MEASURING HOW FAR A RISK‐TAKER IS FROM GOOD CONDUCT
CHAPTER 18: Worked Example 8: Calculating a Risk‐Taker's Conduct Risk Index
OVERVIEW
CALCULATION OF A NEGATIVE CONDUCT RISK MARKER SCORE
SCORES AGGREGATION AND FULL OFFSETTING
POSITIVE CONDUCT RISK MARKER SCORES
CALCULATION OF THE OVERALL SCORES
CALCULATION OF THE CONDUCT RISK INDEX
CHAPTER 19: Hot Questions Still Pending
NOTES
CHAPTER 20: Understanding the Root Causes of Poor Conduct
CLUSTERING RISK‐TAKERS
IN‐DEPTH ANALYSIS OF BAD APPLES
PUTTING A TANGIBLE VALUE ON DIVERSITY AND INCLUSIVENESS
Appendix
APPENDIX 1
APPENDIX 2
APPENDIX 3
References
Contents
List of Figures
List of Tables
Index
End User License Agreement

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