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Risk Transparency

By Sanjay Sharma

Overview

This book is a valuable resource which will enable you to gain a competitive advantage in the increasingly important area of risk transparency and reporting. Learn how to dissect the form, content and subjective transparency of the information you provide to management and outside stakeholders; and also get guidance on instituting formats and processes for reporting on a regular basis.

Take a free look at the Overview here

Publish date: 24 Dec 2013

Availability: In stock

Product Unit Price Qty
Book - Risk Transparency
£265.00
eBook - Risk Transparency
EPUB
£200.00
OR

Book description

This report, written by highly-experienced industry expert Sanjay Sharma, investigates factors that can inhibit financial institutions and other entities from providing full disclosure of the risks underlying their strategies, portfolios and performance. The author surveys disclosure practices that are generally followed, with relevant examples and commentary on their effectiveness and weaknesses. Prescriptive chapters illustrate how to overcome the drawbacks of disclosure and will also touch upon the evolution of regulatory standards and emerging trends in the aftermath of the financial crisis.  

In the aftermath of the global financial crisis, the issue of risk transparency is at the forefront of the minds of management, investors and regulators alike. Questions are arising surrounding risk transparency as it relates to, or is provided by, exchanges and markets, central banks and regulators. Ensure you are fully informed and equipped to deal with these questions.

You will find no better guide to the practice of professional risk management today than Sanjay Sharma's new book, Risk Transparency. Dr. Sharma provides a step-by-step guide on how you can harness critical risk information to provide insight and actionable information to risk takers and senior management.

In a voice that is both engaging and authoritative, Dr. Sharma accompanies you on a joint quest to develop risk templates and disclosures that will empower decision makers.  Dr. Sharma becomes your co-pilot as you review all the critical components: Market, Credit, Liquidity, and Operational Risk.  There are also special chapters devoted specifically to Systemic Risk, Regulation, and Institutional Disclosure…

…Risk Transparency is chock-full of insights, helpful tips, and pitfalls to be avoided.   The author provides comparative presentations and side-by-side tabular and graphic formats and explains what works and how it works well.  He explains where your emphasis should be focused and how to best interact with senior management and risk takers.”

Donahoe, former Senior Risk Officer at Barclays Capital and RBC

Book details

ISBN
Book - 9781906348809 / eBook - 9781782721390
Publish date
24 Dec 2013
Format
Paperback
Size
A4

Author biography

Sanjay Sharma

Sanjay Sharma is the Chief Risk Officer of Global Arbitrage and Trading at RBC Capital Markets in New York. He oversees the risk of several trading strategies with a global footprint across a multitude of asset classes and instruments including equities, fixed income and rates, currencies, credit, mortgages, convertible bonds, and volatility. His career in the financial services industry spans over two decades during which he has held investment banking and risk management positions at Goldman Sachs, Merrill Lynch, Citigroup, Moody’s and Natixis. He holds a Ph.D. in Finance and International Business from New York University and an MBA from the Wharton School of Business, and has undergraduate degrees in Physics and Marine Engineering.

Table of contents

1. Risk Transparency: An Overview

Foundational Framework
Barriers to Risk Transparency
Ensuring Transparency
Conclusion

2. Risk and Uncertainty: The Foundation of Transparency

Definitional Frameworks
Conclusion
Appendix 2.1: Risk and Uncertainty – a Case Study

3. Model Risk

Overview of Quantitative Models
Components of Quantitative Models
Model Implementation
Flaws and Limitations of Quantitative Models
Model Risk Components
Model Interpretation
Model Risk Management Framework
Model Transparency
Conclusion
Appendix 3.1: A Complete Mathematical Description of the Black–Scholes Model
Appendix 3.2: A Qualitative Description of Black–Scholes Model with Limitations, Assumptions Etc
Appendix 3.3: A Qualitative Description of the Cox–Ingersoll–Ross Model
Appendix 3.4: A Qualitative Description of a Mortgage Portfolio Cashflow Modelling Framework

4. Credit Risk

Introduction
Credit Risk versus Market Risk
Credit Risk Transparency: Part I
Classification of Debt and Credit Sensitive Risk Assets
Quantification of Credit Risk
Credit Risk Transparency: Part II
Conclusion
Appendix 4.1: Structured Credit Portfolios and Securitisation
Appendix 4.2: Case Study of Transparency Associated with Collateralised Loan Obligations (CLOs)

5. Market Risk

Introduction
Market Risk Measurement
Interest-rate and Other Risk Measures
Valuation Framework
Decomposition and Analysis of Revenue and Profitability
Conclusion

6. Liquidity Risk

Introduction
Categorisation of Liquidity Risk
Asset–liability Management
Sound Liquidity Management Practices
Practical Considerations
Measurement of Liquidity
Basel III Liquidity Framework
Transparency of Liquidity Risk
Conclusion

7. Operational Risk

Definition of Operational Risk
Taxonomy and Framework for Operational Risk
Operational Risk Transparency – Part I
Management of Operational Risk
Operational Risk Transparency – Part II
Conclusion
Appendix 7.1: Development of Operational Risk Thresholds
Appendix 7.2: Sample Scenario Analysis – External Fraud

8. Value-at-Risk

Conceptual Foundations of VaR
Evolution of VaR as a Measure of Risk
Computational Overview
Dynamics and Limitations of VaR
Recommendations for Making VaR Transparent and Actionable
Conclusion

9. Stress Testing

Introduction and Historical Perspective
Foundations
Stress Testing Framework
Scenario Creation
Reverse Stress Testing
Stress Testing of Specific Risks and Exposures
Systemic Stress Testing and Central Banks
Considerations for Stress-Test Design and Implementation
Conclusion
Appendix 9.1: Stress-Test Case Study
Appendix 9.2: Illustration of Interactive Stress-Testing and Reporting Framework
Appendix 9.3: Examples of Historical and Hypothetical Scenarios

10. Institutional Disclosure

Introduction
Barriers to Institutional Transparency
Framework for Institutional Disclosure
Illustrative Disclosure Samples
Conclusion

11. Systemic Risk

Overview
Systemic Stability Versus Resilience
Systemic Risk as Negative Externality
Anatomy of a Systemic Risk Event
Measurement of Systemic Risk
Systemic Risk Transparency, Associated Challenges and Recommendations
Structure of a Systemic Transparency Framework
Conclusion
Appendix – 11.1: the 2008 Global Financial Crisis – a Case of Observable Vulnerabilities

12. Regulation

Overview of Financial Regulation
Goals of Financial Regulation
Goals of Regulatory Transparency
Organisation of Regulatory Bodies
Policy Formulation and Overview of Regulatory Standards
Challenges for Transparency Related to Regulatory Standards
Moral Hazard
Bank Capital
Unintended Consequences of Regulation
Multiplicity of Standards and Regulatory Bodies
Countercyclical Capital Buffers
Supervisory Transparency
Observation of and Transparency in Institutional Cultures
Conclusion

Testimonials

You will find no better guide to the practice of professional risk management today than Sanjay Sharma's new book, Risk Transparency.  Dr. Sharma provides a step-by-step guide on how you can harness critical risk information to provide insight and actionable information to risk takers and senior management.

In a voice that is both engaging and authoritative, Dr. Sharma accompanies you on a joint quest to develop risk templates and disclosures that will empower decision makers.  Dr. Sharma becomes your co-pilot as you review all the critical components: Market, Credit, Liquidity, and Operational Risk.  There are also special chapters devoted specifically to Systemic Risk, Regulation, and Institutional Disclosure.

Using illustrative reports, charts, tables and diagrams, you are immersed in the world of the professional risk manager.  Terms are defined, concepts are explained, insights are proven, and the analysis is always rigorous.  Dr. Sharma presents actual templates that can enable you to transform the information you currently provide as well as identifying other key risk information that can provide valuable insight to users.  The fundamental goal is to ensure that internal and external disclosure can prompt actions that will help manage risks and capital effectively.

The goal is always to make risk comprehensible and intuitive. The author focuses on how to overcome structural impediments and provide the proper context, format, and commentary to inform and empower senior management. Dr. Sharma understands the focus and limitations of risk consumers and explains how to modify reporting to adapt to a constantly changing external environment.  

In addition to the many templates, Dr. Sharma explains the why and how of improving your existing analytical structures.   A marine engineer (building ships) before entering risk management, Dr. Sharma brings a special discipline and focus to Enterprise Risk Management as well as two decades of senior risk experience at Goldman, RBC, Moody's, and other leading financial institutions.

Risk Transparency is chock-full of insights, helpful tips, and pitfalls to be avoided.   The author provides comparative presentations and side-by-side tabular and graphic formats and explains what works and how it works well.  He explains where your emphasis should be focused and how to best interact with senior management and risk takers.

Two of the areas that receive special focus are creating Stress Scenarios and addressing Systemic Risk.  The author explains in step-by-step fashion the questions to ask and how to conceptualize and construct Stress Scenarios over a continuum of severity.  He presents case studies and demonstrates how to interpret results, calibrate the tests, and estimate the feedback effects.  

The author also presents a survey of the accumulated literature on Systemic Risk and focuses on what has worked and proposes other approaches that could work to better capture this phenomenon.  He proposes a four step analysis to analyse Systemic Risk with a special focus on how the risk propagates itself through financial markets.  Ample reference and examples from the 2008 and earlier crisis are woven into the analysis.  

The book is well documented, has an extensive index, and you can read it straight through or alternatively you can drill-down into specific risk topics.   Each risk chapter is complete in itself and builds on previous chapters in logical sequence. Readers will likely use Risk Transparency as a ready resource and a hands-on guide to be consulted time and again.  Certainly any Chief Risk Officer would benefit by buying copies and having his/her direct reports implement the insights and methodologies presented.  Risk Transparency will likely become a resource for Risk Managers, Regulators, Company Directors, Consultants and anyone with a need to better understand risk and how to communicate it effectively.  Risk Transparency could also be used as a textbook for graduate school or professional risk management training.   (The only disappointed people will be the large consulting firms who will miss out on six-figure engagements.)

Jan. 21, 2014  Donahoe, former Senior Risk Officer at Barclays Capital and RBC

Customer Reviews

Average customer reviews for Risk Transparency

A hands-on guide to be consulted time and again

Chock-full of insights, helpful tips, and pitfalls to be avoided this book provides a step-by-step guide on how to harness critical risk information and provide insight and actionable information to risk takers and senior management. A ready resource and a hands-on guide to be consulted time and again.
Review by Tom Donahoe , 11/03/2014

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