Financial Risk Management

Financial Risk Management: A Simple Introduction presents a detailed guide to some of the central ideas and tools of financial risk management, with theory, examples, formulas, and calculations to illustrate the analysis.

Calculate leverage, duration, modified duration, and convexity to find the risk exposure and interest rate risk sensitivity of an asset. Understand bond immunization to manage risk, and assess non-vanilla bond risk using both effective duration and effective convexity.

Use value at risk to forecast maximum losses over a period, with detailed step by step instructions provided to using the variance-covariance, historical simulation, and Monte Carlo methods. Learn how to perform autocorrelation and unit root tests to test the square root of time rule.

Conduct time-varying volatility analysis, using detailed steps to create an exponentially weighted moving average and then backtest it for robustness.

Apply financial risk management tools to the empirical 1994 bankruptcy of Orange County, California to determine if it could have been avoided, and assess a number of financial derivative hedge instruments.