The hedge fund industry is in dire need of high-quality, practical literature that can help hedge fund risk managers and compliance managers do their jobs. Unfortunately, there are very few books that fit that bill. At least, that’s the opinion of Aaron Brown, who reserves his strongest comments for his ... click here for more details.

How can you derive the probability of default of a company under Professor Robert Merton?s seminal 1974 model for pricing corporate debt? And what are the similarities between Merton?s corporate debt pricing model and the famous Black-Scholes-Merton model for pricing and hedging options? Gunter Meissner investigates.

The uncertainty of future credit exposure makes the task of modelling counterparty risk quite imposing. Counterparty credit risk extends to every financial institution that participates in the over-the-counter derivatives market, and every participant in that market is familiar with the complex issue of modelling different types of exposure. Michael Pykhtin ... click here for more details.

Islamic financial institutions — particularly Islamic banks that are fully compliant with Sharia’a, or the principles of Islamic law — face a unique set of risk management challenges. Gambling, speculation and interest, for example, are among the prohibitions of Islamic law. Moreover, in compliance with their law, Islamic banks make ... click here for more details.

If you are searching for an approach for calculating interest rate risk or credit risk (or both), you may want to give serious consideration to a t copula model. This approach can potentially be used for simultaneous simulations of multiple risk types, yielding inter-risk diversification benefits. Dr. Marco Folpmers and ... click here for more details.

Do expected shortfall and Beta Value-at-Risk (BVaR) provide superior risk measurement results in comparison to traditional VaR? Do they possess the subadditivity feature that VaR lacks? Richard Warnung contends that ES and BVaR do a better job of capturing the whole distribution of a portfolio.

Is the bubble about to burst in the credit risk market? Referencing market analysis theories and recent data generated by the CreditGrades model for measuring quantitative credit risk, Gordon E. Goodman argues that the price of risk has bottomed out and warns about signs pointing to an abrupt market correction.

Editors Letter Modelling Credit Exposure: The Counterparty Risk Challenge

Risk Management Harmonization on Agenda at United Nations Development Program