Quantitative Risk Management, + Website: A Practical Guide to Financial Risk

by Thomas S. Coleman, Bob Litterman (Foreword)

State of the art risk management techniques and practices―supplemented with interactive analytics All too often risk management books focus on risk measurement details without taking a broader view. Quantitative Risk Management delivers a synthesis of common sense management together with the cutting-edge tools of modern theory. This book presents a road map for tactical and strategic decision making designed to control risk and capitalize on opportunities. Most provocatively it challenges the conventional wisdom that "risk management" is or ever should be delegated to a separate department. Good managers have always known that managing risk is central to a financial firm and must be the responsibility of anyone who contributes to the profit of the firm. A guide to risk management for financial firms and managers in the post-crisis world, Quantitative Risk Management updates the techniques and tools used to measure and monitor risk. These are often mathematical and specialized, but the ideas are simple. The book starts with how we think about risk and uncertainty, then turns to a practical explanation of how risk is measured in today's complex financial markets. Providing the models, tools, and techniques firms need to build the best risk management practices, Quantitative Risk Management is an essential volume from an experienced manager and quantitative analyst.

576 pages, Hardcover

First published March 20, 2012

Reviews

[Cold · Rating 5 out of 5]

Excellent book on financial risk management. Distills the intuition behind risk management and measurement, putting emphasis on not confusing the two. Great big picture book, but maybe look elsewhere to understand the specific quant techniques.

I'm currently designing a course on risk management and it is hard. The temptation is to design a course on applied statistics, but this abstracts away from all the messy, interesting parts. Will read a few more textbooks.

[Max Lybbert · Rating 4 out of 5]

This book is a little more informal than, say, Modern Investment Management: An Equilibrium Approach or The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies. It covers much of the same ground as those books, but it does stress the importance of understanding and managing risk, especially when the risk behaves in an unintuitive way.

Coleman discusses of the best hedge (the position in a security that would offset the risk from the rest of the portfolio as much as possible) and the replicating portfolio (which single asset comes closest to matching the overall portfolio's risk); both of these concepts were new to me.