*** Excerpt from book *** Section 28.1 reviews the organizing principles of accounting for financial assets with a view toward internal reporting. Section 28.2 discusses two major issues in reporting, the valuation of positions and the choice of hedge accounting method. We then discuss external financial reporting, or disclosure rules, for ... click here for more details.

Value-at-risk (VAR) models are only useful insofar as they predict risk reasonably well. This is why the application of these models always should be accompanied by validation. Model validation is the general process of checking whether a model is adequate. This can be done with a set of tools, including ... click here for more details.

*** Excerpt from book *** This chapter starts our coverage of quantitative analysis by discussing bond fundamentals. Section 1.1 reviews the concepts of discounting, present values, and future values. Section 1.2 then plunges into the price-yield relationship. It shows how the Taylor expansion rule can be used to relate movements in ... click here for more details.

These 5 chapters introduces markets for derivatives, fixed-income securities, fixed-income derivative products, equities, currency and commodities, as well as pricing methods for these products. Each chapter includes sample FRM questions and explanations.

*** Excerpt from book *** Section 22.1 presents the rationale for credit derivatives. Section 22.2 describes stand-alone credit derivatives contracts, including credit default swaps, total return swaps, credit spread forward and option contracts. It also discusses the pros and cons of credit derivatives. Section 22.3 provides an introduction to the pricing ... click here for more details.

*** Excerpt from book *** This chapter turns to the quantitative measurement of credit exposure. Section 21.1 describes the general features of credit exposure for various types of financial instruments, including loans or bonds, guarantees, credit commitments, repos, and derivatives. Section 21.2 shows how to compute the distribution of credit exposure ... click here for more details.

These 6 chapters cover credit risk measurement and management including default probability estimation techniques, credit exposure modeling and use of credit derivatives and structured products. Each chapter includes sample FRM questions and explanations.

*** Excerpt from book *** Section 9.1 introduces equity markets and presents valuation methods. Section 9.2 briefly discusses convertible bonds and warrants. These differ from the usual equity options in that exercising them creates new shares. Section 9.3 then provides an overview of important equity derivatives, including stock index futures, stock ... click here for more details.

*** IMPORTANT *** Please note that this is the electronic version of the FRM Handbook, 4th Edition and does NOT include the Sample Test CD. This document will be delivered as an encrypted PDF file that can be printed twice. To order a hard copy, please go to http://www.garpdigitallibrary.org/display/frmhandbook.asp

*** Excerpt from book *** This chapter turns to best practices for firm-wide management of financial risks. The financial industry has come to realize that risk management should be implemented on a global basis, across business lines and types of risk. This is due to a number of factors, including (1) ... click here for more details.