John Hull - Risk Management and Financial Institutions

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Copyright 2012 by John C. Hull. All rights reserved.

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

This book was previously published in two editions by Prentice Hall in 2006 and 2009.

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Library of Congress Cataloging-in-Publication Data:

Hull, John, 1946
Risk management and financial institutions + website / John C. Hull. 3rd ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-118-26903-9 (cloth); ISBN 978-1-118-28477-3 (ebk);
ISBN 978-1-118-28291-5 (ebk); ISBN 978-1-118-28638-8
1. Risk management. 2. Financial institutionsManagement. I. Title.
HD61.H83 2012
332.10681dc23
2012003579

To Michelle, Peter, and David

Business Snapshots

Preface

Much has happened in financial markets since the second edition of this book was published. We have experienced the worst crisis in more than 70 years. Risk management has assumed more importance than ever before in financial institutions. Market participants are wrestling with initiatives such as Basel III and DoddFrank. Liquidity risk and scenario analysis are receiving much more attention.

Risk Management and Financial Institutions has been expanded and updated to reflect these market developments. Like my other popular text Options, Futures, and Other Derivatives , this book is designed to be useful to practicing managers as well as college students. Those studying for GARP and PRMIA qualifications will find the book particularly helpful.

The book is appropriate for elective courses in either risk management or financial institutions. It is not necessary for students to take a course on options and futures markets prior to taking a course based on this book. But if they have taken such a course, some of the material in the first eight chapters does not need to be covered.

The level of mathematical sophistication and the way material is presented has been managed carefully so that the book is accessible to as wide an audience as possible. For example, when covering copulas in Chapter , I present the intuition followed by a detailed numerical example; when covering maximum likelihood methods in Chapter and extreme value theory in Chapter , I provide numerical examples and enough details for readers to develop their own Excel spreadsheets. I have also provided my own Excel spreadsheets for many applications on my website: www.rotman.utoronto.ca/~hull .

This is a book about risk management, so there is relatively very little material on the valuation of derivatives. (This is the main focus of my other two books Options, Futures, and Other Derivatives and Fundamentals of Futures and Options Markets .) The appendices at the end of the book include material that summarizes some of the key results that are important in risk management and the DerivaGem software can be downloaded from my website.