Quantitative risk models have been presented as one of the causes of the financial crisis that started in 2007. In this fully updated second edition, authors Christian Meyer and Peter Quell give a holistic view of risk models: their construction, appropriateness, validation and why they play such an important role in the financial markets.
This new edition provides financial institutions with a toolbox to raise the key questions when it comes to integrating the results of quantitative risk models into business decisions.
Readers will be able to:
Chapters include:
ISBN | 9781782722632 |
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Navision code | MQUE |
Publication date | 26 May 2016 |
Christian Meyer and Peter Quell
Christian Meyer is a quantitative analyst in the portfolio analytics team for market and credit risk in the risk controlling unit of DZ BANK AG in Frankfurt, where he is responsible for the development of portfolio models for credit risk and spread risk in the banking book and incremental risk in the trading book. Before joining DZ BANK, he worked at KPMG, where he dealt with various audit and consulting aspects of market risk, credit risk and economic capital models in the banking industry. Christian holds a diploma and PhD in mathematics, and is a member of the editorial board of the Journal of Risk Model Validation.
Peter Quell is head of the portfolio analytics team for market and credit risk in the risk controlling unit of DZ BANK AG in Frankfurt. Before joining DZ BANK, he was manager at d-fine GmbH, where he dealt with various aspects of risk management systems in the banking industry. Peter holds an MSc in mathematical finance from Oxford University and a PhD in mathematics. He is a founding board member of the Model Risk Managers’ International Association (mrmia.org) and a member of the editorial board of the Journal of Risk Model Validation.
About the Authors ix
Abbreviations xi
Introduction 1
PART I: QUANTITATIVE RISK MODELS 5
1 Basics of Quantitative Risk Models 7
2 Usage of Statistics in Quantitative Risk Models 21
3 How Can a Risk Model Fail? 41
PART II: MODEL RISK AND RISK MODEL VALIDATION 77
4 The Concepts of Model Risk and Validation 79
5 Model Risk Frameworks 103
6 Validation Tools 119
7 Regulation 161
PART III: MODEL RISK IN MARKET RISK MODELS 187
8 The Short-term Perspective 189
9 A Benchmark Model for Market Risk 207
10 The Medium-term Perspective 247
PART IV: MODEL RISK IN CREDIT RISK MODELS 271
11 Modelling and Simulation 273
12 Data 293
13 Model Results 319
14 Conclusion 345
References 351
Index 363