In practice, people are not nearly as rational as it is assumed and they make more mistakes than their egos are willing to honestly admit. Over-optimism, stubbornness, inertia...human behaviour is increasingly recognised as a factor in decisions with risk outcomes. The management of risk can no longer ignore behaviour on the grounds that if you can't measure it you can't manage it. Measuring and managing the elusive human factor - the dark side - of risk is the challenge that Luca Celati takes on in this groundbreaking book. Rather than concentrating entirely on the theory, empirical studies and academic debates, this book makes the topic more accessible for people who want to roll up their sleeves and get their hands dirty. This book will provide practical guidelines and thought processes to use inside a financial institution, typically a Bank with a trading room, dealmakers and risk managers, the latter looking at market risk, credit risk or both. What happens inside the decision-makers' heads - rather than the sophistication of the tools they use - is the prime concern here.
Reihe
Sprache
Verlagsort
Verlagsgruppe
Pearson Education Limited
Zielgruppe
Maße
Höhe: 241 mm
Breite: 194 mm
Dicke: 26 mm
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ISBN-13
978-0-273-66346-1 (9780273663461)
Copyright in bibliographic data and cover images is held by Nielsen Book Services Limited or by the publishers or by their respective licensors: all rights reserved.
Schweitzer Klassifikation
Luca Celati is the Founder and CIO at Abraxas Capital Management. Prior to founding Abraxas, he held a range of trading and risk roles. Luca has an MBA from Northwestern JL Kellogg Graduate School of Management.
PART I: Theory 1 Throwing in the gauntlet 1.1 The punchline: what's in it for you? 1.2 The issue and its sub-themes 1.3 Not another behavioural finance book 1.4 Denial dies hard 1.5 It begins inside you 1.6 What this book is and what it is not 1.7 Who should read this book 1.8 About the author 1.9 Structure of the book 2 Your information risk processing 2.1 About the Questionnaire - a disclaimer 2.2 Questionnaire instructions 2.3 Briefly on your brain: information processing and physiology 2.4 Your information channels and their limitations 2.5 Your decision-making styles and motivations 2.6 Reality or frames? How do you interpret what you see? 3 Frames of risk: the concept 3.1 Frames of risk in decisions: one concept, multiple applications 3.2 Frames of risk definition 3.3 At a glance 3.4 The systemic frame of risk 3.5 The organizational frame of risk 3.6 The individual frame of risk 4 Behavioral finance and basic biases 4.1 Academic anathemas 4.2 The efficient market hypothesis (EMH) 4.3 The behavioural finance challenge 4.4 Biases basics 5 Individual biases and risk consequences 5.1 The broad picture 5.2 Representativeness and anchoring 5.3 Biased probability assessments 5.4 Self-preservation biases 5.5 Sequential information-processing bias 5.6 Symptoms of risk disorder syndrome (RDS) 6 We are not alone: group think, herding and game theory 6.1 Another challenge to conventional economics and finance 6.2 Game theory and instability in strategic interaction 6.3 Group risk biases and consequences 6.4 Group and game theory experiments and empirical studies PART II: Practice 7 Risk framing and communication 7.1 The information fallacy 7.2 Frames in trading and portfolio decisions 7.3 Aversion to ambiguity meets risk management 7.4 Other trading frames 7.5 Risk communication 8 Riding the tiger: the trader 8.1 Psychology in the trading room: a diamond buried in the sand 8.2 The London Business School studies 8.3 Behaviour of speculators in commodity and futures markets 8.4 Additional behavioural research on other types of risk-takers 8.5 The seven cardinal sins of trading 8.6 Future indications for research 9 Risk management, financial alchemy and illusion of control 9.1 Risk management: one word, many meanings 9.2 What proper risk management really is 9.3 Frames in risk management 9.4 Key internal clients and their delusions 9.5 The external constituencies and their motivations 10 Frames in action: financial risk disasters and panics 10.1 New accidents, old mis-management 10.2 The dangerous mix of leverage and overconfidence 10.3 Houston, we have a problem: Enron 10.4 Overconfidence in processes 10.5 Markets beat overconfidence in quantitative models: LTCM 10.6 'Hot hand' and overconfidence in trading skill: Orange County 10.7 Herds and financial panics 11 Other Masterpieces outside finance 11.1 Human issues in new technology management 11.2 The Space Shuttle 11.3 Nuclear disasters 11.4 Bhopal 11.5 The Titanic PART III: Going forward 12 So, what now? 12.1 More on your beliefs and where they can lead you 12.2 Your own mental computer - basics 12.3 Moving forward 12.4 Re-programming the background of a risk problem 13 The voice of wisdom: or is it? 13.1 Word to the Opposition 13.2 Denial = comfort 13.3 Active Resistance 14 Epilogue14.1 Wrap-up 14.2 Individual frame of risk summary points 14.3 Organizational frame of risk summary points 14.4 Systemic frame of risk summary points 14.5 Farewell Appendices Appendix A: Psychometric questionnaire Appendix B: Quite some pearls of wisdom... Appendix C: Summary of key game theory models Appendix D: Additional tables for Chapter 7 Glossary References Further reading for practitioners
