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Table Of Contents

Introduction
METHODOLOGIES FOR RISK MEASUREMENT
Models based on Distributional Assumptions
2.1 The multivariate normal model for returns
2.2 Monte Carlo simulation
2.3 Parametric methods
Models Based on Empirical Distributions
3.1 Historical simulation
4.1 Historical scenarios
4.2 User-defined simple scenarios
4.3 User-defined predictive scenarios
PRICING CONSIDERATIONS
Pricing Framework
5.1 Discounting and mapping cash flows
5.1.1 Basic pricing concepts and conventions
5.1.2 Cash flow mapping for parametricVaR calculations
5.2 Generalized framework
5.2.1 Floating rate instruments
5.2.2 Expansion of the framework
5.3. EQUITY, FOREIGN EXCHANGE AND COMMODITIES 51
5.3 Equity, foreign exchange and commodities
5.4 Nonlinear instruments and derivatives
5.4.1 Black-Scholes and option pricing
5.4.2 Black’s model and interest rate derivatives
5.4.3 Term structure model and interest rate trees
5.4.4 Analytic approximations
5.5 Price calibration
STATISTICSAND REPORTS
Statistics
6.1 Value at Risk
6.1.1 Using simulation methods
6.1.2 Using parametric methods
6.2 MarginalVaR
6.3 IncrementalVaR
6.4 Expected Shortfall
6.5 Coherent risk measures
6.6. BENCHMARKING AND RELATIVE STATISTICS 75
6.6 Benchmarking and relative statistics
7.1 An overview of risk reporting
7.2 Drilldowns
7.2.1 Drilldowns using simulation methods
7.2.2 Drilldowns using parametric methods
7.3 Global bank case study
7.4 Conclusion
Appendices
Non-normal Distributions
A.1 The pros and cons of normal distributions
A.1.1 Univariate normal distribution
A.1.2 Multivariate normal distribution
A.2. ALTERNATIVES TO THE NORMAL DISTRIBUTION 97
A.2 Alternatives to the normal distribution
A.2.1 t distribution
A.2.2 Mixture distributions
A.2.3 ExtremeValueTheory
A.3. DEPENDENCE AND COPULAS 99
A.3 Dependence and copulas
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Return to Risk Metrics - The Evolution of a Standard

Return to Risk Metrics - The Evolution of a Standard

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Published by Nirmaljit Singh

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Published by: Nirmaljit Singh on Jan 07, 2012
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01/10/2012

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