Risk Management

The All-in-One Banker's and Financial Manager's Guide for Implementingand Usingan Effective Risk Management Program

In today's world of multibillion-dollar credit losses and bailouts, it has become increasingly imperative for corporate and banking leaders to monitor and manage riskon all fronts. Risk Management introduces and explores the latest financial and hedging techniques in use around the world, and provides the foundation for creating an integrated, consistent, and effective risk management strategy.

The tested and comprehensive analyses and insights in Risk Management give bankers and financial managers all the necessary information for:

• Risk Management Overview--From the history of risk management to the new regulatory and trading environment, a look at risk management past and present
• Risk Management Program Design--Techniques to organize the risk management function, and design a system to cover your organization's many risk exposures
• Risk Management Implementation--How to use the myriad systems and productsvalue at risk (VaR), stress-testing, derivatives, and more for measuring and hedging risk in today's marketplace

In the financial world, the need for a dedicated risk management framework is a relatively recent phenomenon. But as the Long-Term Capital Management and BankAmerica crises attest, lack of up-to-date knowledge concerning its many components can be devastating. For financial managers in both the banking and business environments, Risk Management will introduce and illustrate the many aspects of modern risk managementand strengthen every financial risk management program.

Exploding global competition, increasing regulations, and the ever-changing product mix of innovative, intricate derivative and securitization products have pushed risk management to the forefront of today's financial landscape. Corporate and banking executives trying to make sense of this environment often find themselves wasting valuable time searching for detailsand actually creating risk through innocent misinterpretations or misguided hedging strategies.

Risk Management consolidates the entire field of corporate risk administrationfrom data and technological infrastructure to investment and hedging strategies that include innovative derivatives credit risk securitization techniquesinto one all-inclusive, easily accessible reference. Michel Crouhy, Dan Galai, and Robert Markseasoned finance professionals with an unmatched breadth of experience covering banking, corporate, and academic risk management applicationswalk you through risk management with the focus on concrete, results-oriented tips and analysis.

The result is, quite frankly, the only reference you'll need for a quick, thorough understanding of today's complex financial risk management challenges. Look to the expert analysis and proven suggestions in Risk Management for a no-nonsense overview of:

• Integrated Risk Management--How to understandand develop the necessary tools for measuring and managing all of your firm's risk in terms of a common unit
• Regulatory Environment--Group of 30 (G-30) policy recommendations, BIS 1998 models, and the standardized approach proposed by the Basle Committee
• Market Risk--New rules set by the SEC for traded companies to disclose their risk management policies and quantify their exposure to market risk
• Practical Measurement Issues--Utilizing historical, implied, and stochastic models to measure volatility, plus helpful summaries of measuring correlations and the yield curve
• Future Considerations--Expected conditions and effects of the BIS 2000+ Accord, with review of the G-12 recommendations to improve counterparty risk management practices

Never before have the fields of banking and corporate financial risk management been as complicatedand the stakes as unyielding. Whether used as an essential resource for institutional financial risk management, a comprehensive text for courses concentrating on bank risk management, or simply as an unprecedented reference covering every important aspect of the discipline, Risk Management will bring you up-to-date on an area that promises to increase in importance as we enter the uncharted waters of the 21st century.

Last year's headline-grabbing stories of the notorious bailout of Long-Term Capital Management and the $1.4 billion credit loss for BankAmerica opened the eyes of the investment world. These turbulent times have meant increased awareness of risk management and have lead to late breaking developments in new research, techniques, and theories in the field. Given the high stakes in today's business world with financial dealings in the billions (e.g., derivatives), it's easy to see why risk management has become the key buzzword on Wall Street. While Jorion focuses strictly on market risk, today's financial professionals are also evaluating credit risk and operational risk. Managing Risk provides a comprehensive description and analysis of modern risk management, including the regulatory aspects, organizational issues, potential problem areas, and tools to control and manage the many different kinds of risks: market risk, credit risk, and operational risk. It also discusses: structuring and managing the risk management function in a firm; practical measurement issues in the field; risk management in both financial and non-financial institutions.