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The current demand for well-qualified graduates in the area of quantitative finance has never been stronger and it greatly exceeds supply. It is no longer feasible for financial institutions to recruit from the relatively small pool of new PhD mathematicians and physicists. In order to plug this gap many of the major universities in the UK (and in the USA) are now offering designer MSc level courses in financial engineering. The aim of these courses is to provide students with a broad sweep of advanced applicable finance which prepares the students to work as quantitative analysts in financial markets or to study for a doctorate.
There are many textbooks on financial risk management however relatively few of these develop and emphasize the mathematical story behind this subject. In short, there isn't an obvious mathematical risk management equivalent to the mathematical pricing textbooks mentioned in the previous subsection.
There appears to be a lack of innovation in the mathematical treatment of many important topics in risk management (and too much emphasis on others). The existing books fall into two categories:
Whirlwind surveys with only brief expositions of mathematical ideas;
Rigorous mathematical exposition which is either too focussed on a limited number of topics or too advanced for an introductory level.
This textbook will be influenced by the author's teaching style. The book will be presented as a self contained mathematical journey from the early ideas of risk quantification up to the sophisticated models and approaches of the present day, linking and highlighting the milestones along the way.
List of contents
Chapter 1 The Nature of Financial Risk
Chapter 2 The Mathematical Toolbox
Chapter 3 Mean Variance Analysis and the CAPM
Chapter 4 Multi-Factor Models and the Arbitrage Pricing Theorem
Chapter 5 Value at Risk: A Parametric Approach
Chapter 6 The Statistical Toolbox
Chapter 7 Statistical Properties of Financial Returns
Chapter 8 Time Varying Volatility
Chapter 9 Extreme Value Theory: Applied to Value at Risk
Chapter 10 Non Linear Risk
Chapter 11 Numerical Methods for Value at Risk
Chapter 12 Implementing and Testing Risk Models
Chapter 13 Copula Methods
Chapter 14 Mathematical Models for Credit Risk
Chapter 15 Valuation of Credit Derivatives
Chapter 16 Operational Risk
