View Table of Contents for Financial Risk Forecasting Written by renowned risk expert Jon Danielsson, the book begins with an introduction. Written by renowned risk expert Jon Danielsson, the book beginswith an introduction to financial markets and market prices,volatility clusters. Written by renowned risk expert Jon Danielsson, the book begins with an introduction to financial markets and market prices, volatility clusters, fat tails and .
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Written by renowned risk expert Jon Danielsson, the book beginswith an introduction to financial markets and market prices,volatility clusters, fat tails and nonlinear dependence. It thengoes on to present volatility forecasting with both univatiate andmultivatiate methods, discussing the various methods used byindustry, with a special focus on the GARCH family of models.
Theevaluation of the quality of forecasts is discussed in detail. Next, the main concepts in risk and models to forecast risk arediscussed, especially volatility, value-at-risk and expectedshortfall. The focus is both on risk in basic assets such as stocksand foreign exchange, but also calculations of risk in bonds andoptions, with analytical methods such as delta-normal VaR andduration-normal VaR and Monte Carlo simulation. The book then moveson to the evaluation of risk models with methods like backtesting,followed by a discussion on stress testing.
The book concludes byfocussing on the forecasting of risk in very large and uncommonevents with extreme value theory and considering the underlyingassumptions behind almost every risk model in practical use —that risk is exogenous — and what happens when thoseassumptions are violated.
Every method presented brings together theoretical discussionand derivation of key equations and a discussion of issues inpractical implementation. Each method is implemented in both MATLABand R, two of the most commonly used mathematical programminglanguages for risk forecasting with which the reader can implementthe models illustrated in the book.
The book includes four appendices. The first introduces basicconcepts in statistics and financial time series referred tothroughout the book. And the final looks at the concept of maximum likelihood,especially issues in implementation and testing. The book is accompanied by a website – www.
With his new book, Professor Danielsson has risen to the taskand produced a great book that combines his expertise with years ofteaching market risk at LSE and other major universities. Withperfect timing, this book achieves two objectives the academic andscientific community had to face: A realaccomplishment and a must read for both risk professionals andstudents in the quantitative finance track. Thebook moves gradually from traditional risk measures to downsiderisk measures and their application in stress testing.
Advancedestimation of volatility models and use of extreme value theory arenot eschewed and are the way to go for scenario analysis. The book ventures into the barren area ofendogeneity of risk drivers.
If I have to make a prediction, Iwould venture that this will keep scientists and markets busy foryears to come. In short, a highly recommended book for any studentof modern risk management techniques and their uses. It is oneof those rare works which successfully combine accessibility withacademic rigour; it is copiously and most informativelyillustrated. The addition of computer code, in commonly-usedprogramming languages, for the implementation of concepts andtechniques demonstrates a profound understanding of practicalissues.
With risk-based regulation now dominating the financiallandscape post-crisis, this book is a timely and authoritativeresource for both students and practising financial analysts, ofwhatever stripe. It will join that select group of works on mybookshelf that have become dog-eared from repeated use over theyears. Financial Risk Forecasting is a complete introduction topractical quantitative risk management, with a focus on marketrisk. Derived from the author’s teaching notes and years spenttraining practitioners in risk management techniques, it bringstogether the three key disciplines of finance, statistics andmodeling programmingto provide a thorough grounding in riskmanagement techniques.
Itthen goes on to present volatility forecasting with both univatiateand multivatiate methods, discussing the various methods used byindustry, with a special focus on the GARCH family of models.
The forecasying concludes byfocusing on the forecasting of risk in very large and uncommonevents with extreme value theory and considering the underlyingassumptions behind almost every risk model adnielsson practical use – thatrisk is exogenous – and what happens when those assumptions areviolated. And the final looks at the concept ofmaximum likelihood, especially issues in implementation andtesting.
Would you like to tell us about a lower price? If you are a seller for this product, would you like to suggest updates through seller support? Derived from the authors teaching notes and years spenttraining practitioners in risk management techniques, it bringstogether the three key disciplines of jjon, statistics andmodeling programmingto provide a thorough grounding in riskmanagement techniques.
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Financial Risk Forecasting
Marcos Lopez de Prado. From the Inside Flap “More than ever risk managers in financial institutions have toassess the risk of financial products and portfolios forecasying a rigorousway. Wiley; 1 edition April 25, Language: Start reading Financial Risk Forecasting on your Kindle in under a minute. Don’t have a Kindle? Try the Kindle edition and experience these great reading features: Share your thoughts with other customers. Write a customer review.
Financial Risk Forecasting by Danielsson, Jon
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I am satisfied with this purchase. I don’t think it is a one stop shop for everything you would want to know but the approach and exposition are solid and I would recommend this text.
One person found this helpful. There is nothing new in the topics discussed in this book and you can get a fuller and better treatment of those topics in many other textbooks.
The promise of this book is that it would provide code for implementing various models.
However, where this book falls short is in providing code for more complex models finaancial these don’t even have to be the real advanced modelsin which any discussion related to programming is absent.
For example, the book has a brief section on copulas with no code or any reference to programming issues or tips. If I wanted to read about copulas I would have chosen a different book, because the brief discussion of the subject matter doesn’t cover the important points.
Kindle Edition Verified Purchase. Financiall balanced approach enteren theory and practice. The Theory and Practice of Forecasting Market The book is ok but each theme is treated with superficiality. With a title like that, you expect a certain type of content.
The number of pages are too few in order to treat properly this kind of topics. Moreover, even if the author provide an errata corrige the number of errors are embarrassing. Note also that the codes of chapter 3 “multivariate volatility models” doesn’t work anymore probably due to MATLAB update. I recommend this product only for an introduction. R has always been my favorite language to forecast financial risk in my research and consulting.
But, I have been reluctant to use it in my lectures on financial risk. It is certainly not the absence of appropriate R packages that refrained me. However, teaching the practice of forecasting financial risk in R, is more than showing the students how to read data in R and obtain “a number” by applying the function to their time series. It requires students to understand the statistical properties fjnancial financial time series, build models that accommodate the statistical features of the data, test the validity of their risk model and interpret the risk forecasts.
The book “Financial Risk Forecasting” by Jon Danielsson will be a very useful reference manual for my course. Let me illustrate this for the learning objective of calculating portfolio expected shortfall using dynamic conditional covariance estimates. Appendix B gives forecassting hands-on introduction to inputting time series in R, work with vectors and matrices, and apply and write functions in R.
There is even some attention given to efficient programming by avoiding loops when possible. Chapter 1 presents the statistical techniques used for analyzing prices and returns in financial markets, in particular the tools needed to illustrate the stylized facts of skewness, fat-tails, time-varying volatility and non-linear dependence between multiple return series. Once the properties of the time series have been understood, the models that accommodate the features of forecssting data are introduced.
Chapter 4 then derives the formulas of Value-at-Risk and Expected Shortfall, for single assets and portfolios. Chapter 8 shows clearly how to backtest risk models using among others Bernouilli coverage tests.
There are many more interesting topics in the books. Chapters focus on the estimation of risk of investing in bonds and options, with analytical methods such as delta-normal VaR and duration-normal VaR but also by simulation. Chapter 8 describes the implementation of stress tests. Some of the stress scenarios correspond to very large and uncommon events, requiring extreme value theory EVTwhich is discussed in Chapter 9.
The book concludes with a warning that most risk models assume that financial risk is exogenous, but most financial crises have endogenous risk at their heart, where the behavior of financial agents amplifies the risk. Chapter 10 gives an intuitive explanation of endogenous risk and describes endogenous risk models. Finally, the book is supported by a clearly organized website [ I find the book pleasant to read. It presents theoretical material in an intuitive way, while still deriving key equations and discussing the issues in practical implementation with many illustrations, both in the form of numerical examples and figures.
In summary, “Forecasting Financial Risk” strikes an excellent balance between the theory and practice of financial risk forecasting. It combines the programming, financial and statistical aspects of forecasting financial risk in an accessible way. As the book moves gradually from financial time series analysis to modeling and forecasting risk in R, I would recommend it for teaching a computational finance oriented class on risk management.
Also for experienced risk professionals, the book should be useful, as it covers the latest advances in forecasting risk. See all 5 reviews.