Risk Management and Financial Institutions

743 Pages·2015·3.9 MB·English

by  John C. Hull

Risk Management
and Financial
Institutions
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Risk Management
and Financial
Institutions
Fourth Edition
JOHN C. HULL
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LibraryofCongressCataloging-in-PublicationData:
Hull,John,1946–
Riskmanagementandfinancialinstitutions/JohnC.Hull.—FourthEdition.
pagescm.—(Wileyfinanceseries)
Includesindex.
ISBN978-1-118-95594-9(paper);ISBN978-1-118-95596-3(ePDF);
ISBN978-1-118-95595-6(ePUB)
1.Riskmanagement. 2.Financialinstitutions—Management. I.Title.
HD61.H832015
332.1068'1—dc23
2014037477
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
To Michelle, Peter, and David

Contents in Brief
BusinessSnapshots xxi
Preface xxiii
Chapter1:Introduction 1
PARTONE:FINANCIALINSTITUTIONSANDTHEIRTRADING
Chapter2:Banks 25
Chapter3:InsuranceCompaniesandPensionPlans 45
Chapter4:MutualFundsandHedgeFunds 71
Chapter5:TradinginFinancialMarkets 93
Chapter6:TheCreditCrisisof2007 121
Chapter7:ValuationandScenarioAnalysis:TheRisk-NeutralandRealWorlds 137
PARTTWO:MARKETRISK
Chapter8:HowTradersManageTheirRisks 153
Chapter9:InterestRateRisk 175
Chapter10:Volatility 201
Chapter11:CorrelationsandCopulas 231
Chapter12:ValueatRiskandExpectedShortfall 255
Chapter13:HistoricalSimulationandExtremeValueTheory 277
Chapter14:Model-BuildingApproach 299
PARTTHREE:REGULATION
Chapter15:BaselI,BaselII,andSolvencyII 325
Chapter16:BaselII.5,BaselIII,andOtherPost-CrisisChanges 353
Chapter17:FundamentalReviewoftheTradingBook 373
PARTFOUR:CREDITRISK
Chapter18:ManagingCreditRisk:Margin,OTCMarkets,andCCPs 383
Chapter19:EstimatingDefaultProbabilities 401
Chapter20:CVAandDVA 429
Chapter21:CreditValueatRisk 447
PARTFIVE:OTHERTOPICS
Chapter22:ScenarioAnalysisandStressTesting 463
Chapter23:OperationalRisk 481
Chapter24:LiquidityRisk 501
Chapter25:ModelRisk 527
Chapter26:EconomicCapitalandRAROC 547
Chapter27:EnterpriseRiskManagement 565
Chapter28:RiskManagementMistakestoAvoid 579
PARTSIX:APPENDICES
Appendices 591
AnswerstoQuestionsandProblems 629
Glossary 669
DerivaGemSoftware 689
TablesforN(x) 695
Index 699
vii