Rethinking Risk Measurement and Reporting: Volume I - Uncertainty, Bayesian Analysis and Expert Judgement

  • ID: 1481300
  • Book
  • 527 Pages
  • Incisive Media
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The 2007-9 crisis highlighted the dangers of dependence on risk quantification and the importance of taking measurement uncertainty into account. Today, risk managers recognise the need to rethink the way they measure and control risk, and how their findings inform decision-making. Rethinking Risk Measurement and Reporting Volumes I speaks to these needs, providing the techniques and tools for a more effective risk management framework.

Model uncertainty must be accepted as an intrinsic part of risk measurement. This insight is the starting point for Rethinking Risk Measurement and Reporting, which identifies how uncertainty of risk figures can be better understood and expressed and how expert judgement can be absorbed into the fabric of modern risk management.

Edited by Klaus Böcker, Rethinking Risk Measurement and Reporting, will raise the reader’s awareness of model and parameter uncertainty when using mathematical models in financial risk management.

This first volume, “Uncertainty, Bayesian Analysis and Expert Judgement”, is divided into four sections, providing a thorough and rigorous introduction to Bayesian analysis and expert judgment, before moving to more technical content focusing on including stress testing and risk aggregation. A final section is devoted to fundamentals, issues of risk management, such as the nature of risk and cognitive aspects of uncertainty, and also includes reflections and insights from experienced risk managers and regulators, drawing on their experiences of the crisis.

In each section of this volume, emphasis is placed on practice rather than theory.

Important issues covered are:

- An Introduction to Bayesian Analysis
- Expert Judgement
- Stress Testing and Risk Aggregation
- Dependence Modeling
- Asset Allocation
- Reporting, Decision Making and Regulation

Klaus Böcker has assembled leading practitioners and academics within risk management fraternity to provide a comprehensive and integrated approach for improving existing risk measurement, management and reporting. This first volume includes the PRMIA 2010 award winning paper as the chapter “Bayesian Risk Aggregation: Correlation Uncertainty and Expert Judgement”.

The experience collected in this book is invaluable and makes this a must read for everyone working in the financial industry, particularly in risk management.
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About the Editor

About the Authors

Foreword

Introduction

PART I AN INTRODUCTION TO BAYESIAN ANALYSIS

1 On Bayesian Data Analysis
Christian P. Robert, Judith Rousseau
Université Paris-Dauphine

2 On Computational Tools for Bayesian Data Analysis
Christian P. Robert; Jean-Michel Marin
Université Paris-Dauphine; Université Montpellier 2

3 Bayesian Analysis of the Normal Regression Model
Ioannis Ntzoufras
Athens University of Economics and Business

4 Market Correlations in the Euro Changeover Period with a View to Portfolio Management
Gernot Müller
Technische Universität München

5 Robustification of Bayesian Portfolio Allocation
Katrin Schöttle; Ralf Werner; Rudi Zagst
MEAG MUNICH ERGO AssetManagement GmbH; Deutsche Pfandbriefbank AG; Technische Universität München

PART II EXPERT JUDGEMENT

6 Eliciting Univariate Probability Distributions
Jeremy E. Oakley
University of Sheffield

7 Eliciting Multivariate Probability Distributions
Alireza Daneshkhah; Jeremy E. Oakley
University of Strathclyde; University of Sheffield

8 Multiple Dependent Experts’ Opinions: An Illustration from Operational-Risk Measurement
Jean-Philippe Peters
Deloitte

PART III STRESS TESTING, DEPENDENCE MODELLING, RISK AGGREGATION AND ALLOCATION

9 A Bayesian Approach to Coherent Stress Testing
Riccardo Rebonato
Royal Bank of Scotland, Risk Management and Quantitative Analytics, Oxford University, Imperial College, London

10 The Limits of Securitisation: Micro-correlations, Fat Tails and Tail Dependence
Carolyn Kousky; Roger M. Cooke
Resources for the Future; Resources for the Future and Delft University of Technology

11 Vines and Continuous Non-parametric Bayesian Belief Nets with Emphasis on Model Learning
Dorota Kurowicka; Roger M. Cooke
Delft University of Technology; Resources for the Future and Delft University of Technology

12 Bayesian Risk Aggregation: Correlation Uncertainty and Expert Judgement
Klaus Böcker, Alessandra Crimmi; Holger Fink
Risk Analytics and Methods, UniCredit Group; Technische Universität München

13 Bayesian Approaches for Portfolio Construction: A Review
Daniel Giamouridis
Athens University of Economics and Business and Cass Business School

PART IV REPORTING, DECISION MAKING AND REGULATION

14 Regulators under Uncertainty: The Impact of Model Uncertainty and Information Asymmetry
An Chen; Xia Su
University of Bonn; Commerzbank

15 The Psychology of Risk Management
Gaëlle Villejoubert, Frédéric Vallée-Tourangeau
Kingston University

16 What Is Risk? Towards a Unifying Approach
Terje Aven
University of Stavanger, Norway

17 Amalgamating Bayesian Experts: A Sceptical View
Joseph B. Kadane
Carnegie Mellon University

18 The Model and the Manager: Risks Identified and Resolved?
Sebastian Fritz-Morgenthal
HSH Nordbank, Hamburg

19 Re-Thinking Valuation: The Credit Crisis, Illiquid Markets and Model Risk
Dan Rosen
R2 Financial Technologies

20 Why Banks Failed the Stress Test
Andrew G. Haldane
Bank of England
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- Christian P. Robert - Université Paris-Dauphine
- Judith Rousseau - Université Paris-Dauphine
- Jean-Michel Marin - Université Montpellier 2
- Ioannis Ntzoufras - Athens University of Economics and Business
- Gernot Müller - Technische Universität München
- Katrin Schöttle - MEAG MUNICH ERGO AssetManagement GmbH
- Ralf Werner - Deutsche Pfandbriefbank AG
- Rudi Zagst - Technische Universität München
- Jeremy E. Oakley - University of Sheffield
- Alireza Daneshkhah - University of Strathclyde
- Jean-Philippe Peters - Deloitte
- Riccardo Rebonato - Royal Bank of Scotland
- Carolyn Kousky - Resources for the Future
- Roger M. Cooke - Resources for the Future and Delft University of Technology
- Dorota Kurowicka - Delft University of Technology
- Alessandra Crimmi - UniCredit Group
- Holger Fink - Technische Universität München
- Daniel Giamouridis - Athens University of Economics and Business and Cass Business School
- An Chen - University of Bonn
- Xia Su - Commerzbank
- Gaëlle Villejoubert - Kingston University
- Frédéric Vallée-Tourangeau - Kingston University
- Terje Aven - University of Stavanger, Norway
- Joseph B. Kadane - Carnegie Mellon University
- Sebastian Fritz-Morgenthal - HSH Nordbank, Hamburg
- Dan Rosen - R2 Financial Technologies
- Andrew G. Haldane - Bank of England
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