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Financial risk measurement and management. (English) Zbl 1318.91007

The International Library of Critical Writings in Economics 267. Cheltenham: Edward Elgar (ISBN 978-1-84980-390-8/hbk). l, 990 p. (2012).
This book is a collection of many of the key papers (from the author’s point of view) that contribute to the financial risk measurement and management. The range of the papers spreads from L. Bachelier (1900), K. Arrow and G. Debreu (1954), F. Black and M. Scholes (1973) to R. Engle (1982), O. Barndorff-Nielsen and N. Shephard (2002), and J. Christensen, F. Diebold and G. Rudebusch (2011), to name a few. In total, 37 papers are included in this volume.
The book contains Acknowledgement, Introduction and Parts I–VI. In the Introduction, ‘100+ years of financial risk measurement and management’, the author gives an overview of this book and the papers included.
Part I, ‘The role of financial risk measurement and management’, reviews 6 papers written by Arrow and Debreu (1954), Arrow (1964), Modigliani and Miller (1958), Froot and Stein (1998), Black and Scholes (1973), and Whaley (1993).
Part II, ‘Stochastic financial modelling and the failure of normality’, gives an overview of 6 papers written by Bacheleir (1900), Markowitz (1952), Sharpe (1964), Mandelbrot (1963), Fama (1965), Duffie and Pan (1997), and Artzner, Delbaen, Eber and Heath (1999).
Part III contains reviews of 10 papers: Engle (1982), Bollerslev (1986), Taylor (1982), Clark (1973), Barndorff-Nielsen and Shephard (2002), Andersen, Bollerslev, Diebold and Labys (2003), Diebold and Nerlove (1989), Engle (2002), Fleming, Kirby and Ostdiek (2003).
Part IV, ‘Bond markets’, overviews 6 papers written by Nelson and Siegel (1987), Litterman and Scheinkman (1991), Diebold and Li (2006), Vasicek (1977), Duffie and Kan (1996), and Christensen, Diebold and Rudebusch (2011).
Part V, ‘Rare event risk’ reviews 4 papers written by Longin and Solnik (2001), Merton (1974), de Fontnouvelle, DeJesus-Rueff, Jordan and Rosengren (2006), and Rosenberg and Schuermann (2006).
The last part, ‘Financial risk and the business cycle’, overviews 4 papers by Hamilton and Lin (1996), Berkowitz (1999/2000), Allen and Gale (2000) and Diebold, Doherty and Herring (2010).
The book is a good collection of not only classical papers in financial risk management, but also several less well-known papers deserving of more attention. This book will be useful for academics and practitioners dealing with different kind of risks in financial markets.

MSC:

91-06 Proceedings, conferences, collections, etc. pertaining to game theory, economics, and finance
91B30 Risk theory, insurance (MSC2010)
91G99 Actuarial science and mathematical finance
62P05 Applications of statistics to actuarial sciences and financial mathematics
60H30 Applications of stochastic analysis (to PDEs, etc.)
00B60 Collections of reprinted articles
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