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The latest financial crisis has once again shown investors the importance of meticulous risk management. But the traditional methods of risk measurement have weaknesses, which often leads to misestimation of individual and portfolio risks.
In this book, Bernhard Pfaff demonstrates the inadequacies of the conventional tools. In particular, the assumption of independent identical normally distributed returns is ill-suited to the realities of the financial markets.
Based on this premise, Pfaff offers alternatives: these include complex methodologies, such as risk modelling using Copulas, as well as practice-oriented means of risk approximation. The aim throughout is to modify distribution assessments in such a way to render Value-at-Risk and Expected Shortfall more useful in practical risk management.
About the author
Bernhard Pfaff studied economics at the universities of Göttingen, Germany; Davis, California; and Freiburg im Breisgau, Germany. He obtained a diploma and a doctorate degree at the economics department of the last one where he was employed as a research and teaching assistant. He has worked for many years as economist and quantitative analyst in research departments of financial institutions. Bernhard Pfaff is the author and maintainer of the contributed R package "urca".
Summary
The latest financial crisis has once again shown investors the importance of meticulous risk management. But the traditional methods of risk measurement have weaknesses, which often leads to misestimation of individual and portfolio risks.
In this book, Bernhard Pfaff demonstrates the inadequacies of the conventional tools. In particular, the assumption of independent identical normally distributed returns is ill-suited to the realities of the financial markets.
Based on this premise, Pfaff offers alternatives: these include complex methodologies, such as risk modelling using Copulas, as well as practice-oriented means of risk approximation. The aim throughout is to modify distribution assessments in such a way to render Value-at-Risk and Expected Shortfall more useful in practical risk management.
