Miller - Quantitative Financial Risk Management

1. Chapter 2
2. Chapter 3
3. Chapter 4
4. Chapter 5
5. Chapter 6
6. Chapter 7
7. Chapter 8
8. Chapter 9
9. Chapter 10
10. Chapter 11

1. Chapter 1
2. Chapter 2
3. Chapter 3
4. Chapter 4
5. Chapter 5
6. Chapter 6
7. Chapter 7
8. Chapter 8
9. Chapter 9
10. Chapter 10
11. Chapter 11
12. APPENDIX A
13. ANSWERS TO END-OF-CHAPTER QUESTIONS

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Michael B. Miller

Copyright 2019 by Michael B. Miller. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Names: Miller, Michael B. (Michael Bernard), 1973 author.

Title: Quantitative financial risk management / Michael B. Miller.

Description: Hoboken, New Jersey : Wiley, [2019] | Series: Wiley finance series | Includes bibliographical references and index. |

Identifiers: LCCN 2018033207 (print) | LCCN 2018044462 (ebook) | ISBN 9781119522232 (Adobe PDF) | ISBN 9781119522263 (ePub) | ISBN 9781119522201 | ISBN 9781119522201 (hardcover) | ISBN 9781119522232 (ePDF) | ISBN 9781119522263 (ePub)

Subjects: LCSH: Financial risk management.

Classification: LCC HD61 (ebook) | LCC HD61 .M5373 2019 (print) | DDC 332dc23

LC record available at https://lccn.loc.gov/2018033207

Cover Design: Wiley

Cover Images: Sergey Nivens/Shutterstock; whiteMocca/Shutterstock

My first book on financial risk management, Mathematics and Statistics for Financial Risk Management, grew out of my experience working in the hedge fund industry and my involvement with the Global Association of Risk Professionals. It was written for practitioners who may not have had the opportunity to take the advanced courses in mathematics especially those courses in statisticsthat are necessary for a deeper understanding of modern financial risk management. It was also for practitioners who had taken these courses but may have forgotten what they learned. To be honest, I often use the first book as a reference myself. Even authors forget.

As a result of that first book, I was asked to teach a graduatelevel course in risk management. I realized that my students had the opposite problem of my colleagues in the hedge fund industry. My students came to the course with a very strong foundation in mathematics, but knew less about the workings of financial markets or the role of risk managers within a financial firm. This book was written for them, and I have been teaching with the material that this book is based on for a number of years now.

There is considerable overlap between the two books. Indeed, there are some sections that are almost identical. While the first book was organized around topics in mathematics, however, this book is organized around topics in risk management. In each chapter we explore a particular topic in risk management along with various mathematical tools that can be used to understand that topic. As with the first book, I have tried to provide a large number of sample problems and practical endofchapter questions. I firmly believe that the best way to understand financial models is to work through actual problems.

This book assumes that the reader is familiar with basic calculus, linear algebra, and statistics. When a particular topic in mathematics is central to a topic in risk management, I review the basics and introduce notation, but the pace can be quick. For example, in the first chapter we review standard deviation, but we only spend one section on what would likely be an entire chapter in an introductory book on statistics.

Risk management in practice often requires building models using spreadsheets or other financial software. Many of the topics in this book are accompanied by an icon, shown here:

These icons indicate that Excel examples can be found at John Wiley & Sons' companion website for Quantitative Financial Risk Management,www.wiley.com/go/millerfinancialrisk.

Michael B. Miller is the founder and CEO of Northstar Risk Corp. Before starting Northstar, Mr. Miller was Chief Risk Officer for Tremblant Capital and, before that, Head of Quantitative Risk Management at Fortress Investment Group.