Value-at-Risk

Now in an expanded second edition, Value-at-Risk: Theory and Practice is the definitive book on value-at-risk (VaR). It takes readers from the basics of VaR to the most advanced techniques, many of which were never published in book form before. Its focus is on how to make VaR work in practice-how to design, implement, and use scalable production VaR measures on real trading floors.

Practical, detailed examples are drawn from markets around the world, such as: Euro deposits, Pacific Basin equities, physical coffees, and North American natural gas. Sophisticated techniques are fully disclosed, including:






quadratic ("delta-gamma") methods for nonlinear portfolios,
variance reduction (control variates and stratified sampling) for Monte Carlo VaR measures,
principal component remappings,
techniques to "fix" estimated covariance matrices that are not positive-definite,
the Cornish-Fisher expansion, and
orthogonal GARCH.

Real-world challenges relating to market data, portfolio mappings, multicollinearity, and intra-horizon events are addressed in detail. Exercises reinforce concepts and walk readers step-by-step through computations.

The second edition includes three entirely new chapters covering implementation, model risk, and backtesting. In addition, Chapters 3 and 4 have been expanded with new material on probability and statistics. There are twenty-two new exercises. Scattered amidst the new content are new details on the history of VaR as well as personal anecdotes from the author's consulting work.

There are plenty of books that offer an introductory treatment of value-at-risk. This one targets experienced practitioners, researchers, and advanced MBA students.

About the Author
Glyn A. Holton has fifteen years experience working in financial risk management. He has written extensively in the field.