An introduction to value-at-risk / Moorad Choudhry.

The value-at-risk measurement methodology is a widely-used tool in financial market risk management. The fifth edition of Professor Moorad Choudhry's benchmark reference text An Introduction to Value-at-Risk offers an accessible and reader-friendly look at the concept of VaR and its different estimation methods, and is aimed specifically at newcomers to the market or those unfamiliar with modern risk management practices. The author capitalises on his experience in the financial markets to present this concise yet in-depth coverage of VaR, set in the context of risk management as a w.

AN INTRODUCTION TO VALUE-AT-RISK; Concentration limits; CONTENTS; Foreword; Preface; Preface to the first edition; About the author; 1 INTRODUCTION TO RISK; Defining risk; The elements of risk: characterising risk; Forms of market risk; Other risks; Risk estimation; Risk management; The risk management function; Managing risk; Quantitative measurement of risk-reward; Standard deviation; Sharpe Ratio; Van Ratio; 2 VOLATILITY AND CORRELATION; Statistical concepts; Arithmetic mean; Probability distributions; Confidence intervals; Volatility; The normal distribution and VaR; Correlation.

3 VALUE-AT-RISKWhat is VaR?; Definition; Methodology; Centralised database; Correlation assumptions; Correlation method; Historical simulation method; Monte Carlo simulation method; Validity of the volatility-correlation VaR estimate; How to calculate VaR; Historical method; Simulation method; Variance-covariance, analytic or parametric method; Mapping; Confidence intervals; Comparison between methods; Choosing between methods; Comparison with the historical approach; Comparing VaR calculation for different methodologies; Summary; 4 VALUE-AT-RISK FOR FIXED INTEREST INSTRUMENTS.

Fixed income productsBond valuation; Duration; Modified duration; Convexity; Interest rate products; Forward rate agreements; Fixed income portfolio; Applying VaR for a FRA; VaR for an interest rate swap; Applying VaR for a bond futures contract; Calculation illustration; The historical method; Simulation methodology; Volatility over time; Application; Bloomberg screens; 5 OPTIONS: RISK AND VALUE-AT-RISK; Option valuation using the Black-Scholes model; Option pricing; Volatility; The Greeks; Delta; Gamma; Vega; Other Greeks; Risk measurement; Spot ladder; Maturity ladder; Across-time ladder.

Jump riskApplying VaR for Options; 6 MONTE CARLO SIMULATION AND VALUE-AT-RISK; Introduction: Monte Carlo simulation; Option value under Monte Carlo; Monte Carlo distribution; Monte Carlo simulation and VaR; 7 REGULATORY ISSUES AND STRESS-TESTING; Capital adequacy; Model compliance; CAD II; Specific risk; Back-testing; Stress-testing; Simulating stress; Stress-testing in practice; Issues in stress-testing; The crash and Basel III; Stressed VaR; 8 CREDIT RISK AND CREDIT VALUE-AT-RISK; Types of credit risk; Credit spread risk; Credit default risk; Credit ratings; Credit ratings.

Ratings changes over timeCorporate recovery rates; Credit derivatives; Measuring risk for a CDS contract; Modelling credit risk; Time horizon; Data inputs; CreditMetrics; Methodology; Time horizon; Calculating the credit VaR; CreditRisk+; Applications of credit VaR; Prioritising risk-reducing actions; Standard credit limit setting; Integrating the credit risk and market risk functions; 9 A REVIEW OF VALUE-AT-RISK; VaR in Crisis; Weaknesses Revealed; Market risk; Credit risk; Portfolio effects; New Regulation and Development; Procyclicality: stressed VaR (SVaR).