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Financial Risk Measurement and Management
This authoritative volume charts the origins, development, and current frontiers of financial risk management. It emphasizes the role for risk management created by real-world market imperfections, and progresses to consider stochastic financial modeling, the failure of ‘normality’, and time-varying volatility.
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Critical Acclaim
Contributors
Contents
More Information
This authoritative volume charts the origins, development, and current frontiers of financial risk management. It emphasizes the role for risk management created by real-world market imperfections, and progresses to consider stochastic financial modeling, the failure of ‘normality’, and time-varying volatility. Professor Diebold has selected seminal papers by leading academics which cover multiple markets (equities, bonds, etc.), univariate and multivariate perspectives, connectedness and systemic risks, and stress testing. The collection, along with an original introduction by the editor, will be of interest to academics, market participants, and policy-makers, particularly as we chart a new course following the financial crisis of 2007–2008.
Critical Acclaim
‘I have always thought authoritative lists such as “100 books you should read” are fascinating. So it is great to also have such a list available in one’s professional field. Professor Diebold’s book does just that; it compiles his list of academic research articles one should know in risk measurement and management. Through his central position in financial econometrics, based on his own extensive research, Professor Diebold is one of the few who can make such a list. . . Professor Diebold’s fascinating compilation summarizes the history of risk management research, focussing on research prior to the global financial crisis.’
– Esa Jokivuolle, SUERF
‘This collection of papers is an essential set of references for anyone involved in risk management, both in academia and in industry.’
– Andrew Lo, MIT Sloan Management, US
– Esa Jokivuolle, SUERF
‘This collection of papers is an essential set of references for anyone involved in risk management, both in academia and in industry.’
– Andrew Lo, MIT Sloan Management, US
Contributors
34 articles, dating from 1900 to 2009
Contributors include: F. Allen, K. Arrow, D. Duffie, E. Fama, R. Merton, C. Nelson, J. Sceinkman, M.A. Scholes, J. Stein, O. Vasicek
Contributors include: F. Allen, K. Arrow, D. Duffie, E. Fama, R. Merton, C. Nelson, J. Sceinkman, M.A. Scholes, J. Stein, O. Vasicek
Contents
Contents:
Acknowledgements
Introduction Francis X. Diebold
PART I THE ROLE OF FINANCIAL RISK MEASUREMENT AND MANAGEMENT?
1. Kenneth J. Arrow and Gerard Debreu (1954), ‘Existence of an Equilibrium for a Competitive Economy’
2. K.J. Arrow (1964), ‘The Role of Securities in the Optimal Allocation of Risk-bearing’
3. Franco Modigliani and Merton H. Miller (1958), ‘The Cost of Capital, Corporation Finance and the Theory of Investment’
4. Kenneth A. Froot and Jeremy C. Stein (1998), ‘Risk Management, Capital Budgeting, and Capital Structure Policy for Financial Institutions: An Integrated Approach’
5. Fischer Black and Myron Scholes (1973), ‘The Pricing of Options and Corporate Liabilities’
6. Robert E. Whaley (1993), ‘Derivatives on Market Volatility: Hedging Tools Long Overdue’
PART II STOCHASTIC FINANCIAL MODELLING AND THE FAILURE OF NORMALITY
7. Louis Bachelier ([1900] 1964), ‘Theory of Speculation’
8. Harry Markowitz (1952), ‘Portfolio Selection’
9. William F. Sharpe (1964), ‘Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk’
10. Benoit Mandelbrot (1963), ‘The Variation of Certain Speculative Prices’
11. Eugene F. Fama (1965), ‘The Behavior of Stock-Market Prices’
12. Darrell Duffie and Jun Pan (1997), ‘An Overview of Value at Risk’
13. Philippe Artzner, Freddy Delbaen, Jean-Marc Eber and David Heath (1999), ‘Coherent Measures of Risk’
PART III TIME-VARYING VOLATILITY
14. Robert F. Engle (1982), ‘Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation’
15. Tim Bollerslev (1986), ‘Generalized Autoregressive Conditional Heteroskedasticity’
16. Stephen J. Taylor (1982), ‘Financial Returns Modelled by the Product of Two Stochastic Processes – A Study of Daily Sugar Prices, 1961–79’
17. Peter K. Clark (1973), ‘A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices’
18. Ole E. Barndorff-Nielsen and Neil Shephard (2002), ‘Econometric Analysis of Realized Volatility and its Use in Estimating Stochastic Volatility Models’
19. Torben G. Andersen, Tim Bollerslev, Francis X. Diebold and Paul Labys (2003), ‘Modeling and Forecasting Realized Volatility’
20. Ole E. Barndorff-Nielsen and Neil Shephard (2004), ‘Power and Bipower Variation with Stochastic Volatility and Jumps’
21. Francis X. Diebold and Marc Nerlove (1989), ‘The Dynamics of Exchange Rate Volatility: A Multivariate Latent-Factor ARCH Model’
22. Robert Engle (2002), ‘Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models’
23. Jeff Fleming, Chris Kirby and Barbara Ostdiek (2003), ‘The Economic Value of Volatility Timing Using “Realized” Volatility’
PART IV BOND MARKETS
24. Charles R. Nelson and Andrew F. Siegel (1987), ‘Parsimonious Modeling of Yield Curves’
25. Robert Litterman and José Scheinkman (1991), ‘Common Factors Affecting Bond Returns’
26. Francis X. Diebold and Canlin Li (2006), ‘Forecasting the Term Structure of Government Bond Yields’
27. Oldrich Vasicek (1977), ‘An Equilibrium Characterization of the Term Structure’
28. Darrell Duffie and Rui Kan (1996), ‘A Yield-Factor Model of Interest Rates’
29. Jens H.E. Christensen, Francis X. Diebold and Glenn D. Rudebusch (2011), ‘The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models’
PART V RARE EVENT RISK
30. François Longin and Bruno Solnik (2001), ‘Extreme Correlation of International Equity Markets’
31. Robert C. Merton (1974), ‘On the Pricing of Corporate Debt: The Risk Structure of Interest Rates’
32. Patrick de Fontnouvelle, Virginia Dejesus-Rueff, John S. Jordan and Eric S. Rosengren (2006), ‘Capital and Risk: New Evidence on Implications of Large Operational Losses’
33. Joshua V. Rosenberg and Til Schuermann (2006), ‘A General Approach to Integrated Risk Management with Skewed, Fat-Tailed Risks’
PART VI FINANCIAL RISK AND THE BUSINESS CYCLE
34. James D. Hamilton and Gang Lin (1996), ‘Stock Market Volatility and the Business Cycle’
35. Jeremy Berkowitz (1999), ‘A Coherent Framework for Stress Testing’
36. Franklin Allen and Douglas Gale (2000), ‘Bubbles and Crises’
37. Francis X. Diebold, Neil A. Doherty and Richard J. Herring (2010), ‘Introduction’
Acknowledgements
Introduction Francis X. Diebold
PART I THE ROLE OF FINANCIAL RISK MEASUREMENT AND MANAGEMENT?
1. Kenneth J. Arrow and Gerard Debreu (1954), ‘Existence of an Equilibrium for a Competitive Economy’
2. K.J. Arrow (1964), ‘The Role of Securities in the Optimal Allocation of Risk-bearing’
3. Franco Modigliani and Merton H. Miller (1958), ‘The Cost of Capital, Corporation Finance and the Theory of Investment’
4. Kenneth A. Froot and Jeremy C. Stein (1998), ‘Risk Management, Capital Budgeting, and Capital Structure Policy for Financial Institutions: An Integrated Approach’
5. Fischer Black and Myron Scholes (1973), ‘The Pricing of Options and Corporate Liabilities’
6. Robert E. Whaley (1993), ‘Derivatives on Market Volatility: Hedging Tools Long Overdue’
PART II STOCHASTIC FINANCIAL MODELLING AND THE FAILURE OF NORMALITY
7. Louis Bachelier ([1900] 1964), ‘Theory of Speculation’
8. Harry Markowitz (1952), ‘Portfolio Selection’
9. William F. Sharpe (1964), ‘Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk’
10. Benoit Mandelbrot (1963), ‘The Variation of Certain Speculative Prices’
11. Eugene F. Fama (1965), ‘The Behavior of Stock-Market Prices’
12. Darrell Duffie and Jun Pan (1997), ‘An Overview of Value at Risk’
13. Philippe Artzner, Freddy Delbaen, Jean-Marc Eber and David Heath (1999), ‘Coherent Measures of Risk’
PART III TIME-VARYING VOLATILITY
14. Robert F. Engle (1982), ‘Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation’
15. Tim Bollerslev (1986), ‘Generalized Autoregressive Conditional Heteroskedasticity’
16. Stephen J. Taylor (1982), ‘Financial Returns Modelled by the Product of Two Stochastic Processes – A Study of Daily Sugar Prices, 1961–79’
17. Peter K. Clark (1973), ‘A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices’
18. Ole E. Barndorff-Nielsen and Neil Shephard (2002), ‘Econometric Analysis of Realized Volatility and its Use in Estimating Stochastic Volatility Models’
19. Torben G. Andersen, Tim Bollerslev, Francis X. Diebold and Paul Labys (2003), ‘Modeling and Forecasting Realized Volatility’
20. Ole E. Barndorff-Nielsen and Neil Shephard (2004), ‘Power and Bipower Variation with Stochastic Volatility and Jumps’
21. Francis X. Diebold and Marc Nerlove (1989), ‘The Dynamics of Exchange Rate Volatility: A Multivariate Latent-Factor ARCH Model’
22. Robert Engle (2002), ‘Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models’
23. Jeff Fleming, Chris Kirby and Barbara Ostdiek (2003), ‘The Economic Value of Volatility Timing Using “Realized” Volatility’
PART IV BOND MARKETS
24. Charles R. Nelson and Andrew F. Siegel (1987), ‘Parsimonious Modeling of Yield Curves’
25. Robert Litterman and José Scheinkman (1991), ‘Common Factors Affecting Bond Returns’
26. Francis X. Diebold and Canlin Li (2006), ‘Forecasting the Term Structure of Government Bond Yields’
27. Oldrich Vasicek (1977), ‘An Equilibrium Characterization of the Term Structure’
28. Darrell Duffie and Rui Kan (1996), ‘A Yield-Factor Model of Interest Rates’
29. Jens H.E. Christensen, Francis X. Diebold and Glenn D. Rudebusch (2011), ‘The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models’
PART V RARE EVENT RISK
30. François Longin and Bruno Solnik (2001), ‘Extreme Correlation of International Equity Markets’
31. Robert C. Merton (1974), ‘On the Pricing of Corporate Debt: The Risk Structure of Interest Rates’
32. Patrick de Fontnouvelle, Virginia Dejesus-Rueff, John S. Jordan and Eric S. Rosengren (2006), ‘Capital and Risk: New Evidence on Implications of Large Operational Losses’
33. Joshua V. Rosenberg and Til Schuermann (2006), ‘A General Approach to Integrated Risk Management with Skewed, Fat-Tailed Risks’
PART VI FINANCIAL RISK AND THE BUSINESS CYCLE
34. James D. Hamilton and Gang Lin (1996), ‘Stock Market Volatility and the Business Cycle’
35. Jeremy Berkowitz (1999), ‘A Coherent Framework for Stress Testing’
36. Franklin Allen and Douglas Gale (2000), ‘Bubbles and Crises’
37. Francis X. Diebold, Neil A. Doherty and Richard J. Herring (2010), ‘Introduction’
