Financial Risk Management for Dummies

Written by bestselling author and past winner of the GARP Award's Risk Manager of the Year, Aaron Brown, Financial Risk Management For Dummies offers thorough and accessible guidance on successfully managing and controlling financial risk within your company. Through easy-to-follow instruction, you'll find out how to manage risk, firstly by understanding it, and then by taking control of it. Plus, you'll discover how to measure and value financial risk, set limits, stop losses, control drawdowns and hedge bets.

Financial risk management uses financial instruments to manage exposure to risk within firms, large and small—particularly credit risk and market risk. From managing and measuring risk to working in financial institutions and knowing how to communicate risk to your company and clients, Financial Risk Management For Dummies makes it easy to make sense of the management of risk when working in various different financial institutions and concludes by covering the topic of how to communicate risk — how to report it properly and how to deal with and comply with all of the regulations.

• Covers managing risk and working as a financial risk manager
• Provides everything you need to know about measuring financial risk
• Walks you through working in financial institutions
• Demonstrates how to communicate risk

If you work in the financial sector and want to make financial risk management your mission, you've come to the right place!

Aaron Brown is managing director and risk manager at AQR Capital Management and the 2011 GARP Risk Manager of the Year. He wrote Red-Blooded Risk and The Poker Face of Wall Street. He was named Financial Educator of the Year by the readers of Wilmott Magazine and his website won a Forbes Best of the Web award for Theory and Practice of Investing.

Introduction 1

Part I: Getting Started with Risk Management 5

Chapter 1: Living with Risk.7

Chapter 2: Understanding Risk Models 23

Chapter 3: Taking Charge of Risk 41

Chapter 4: Managing Financial Risk 57

Chapter 5: Functions of a Financial Risk Manager 73

Part II: Measuring Financial Risk 85

Chapter 6: Valuing Risk.87

Chapter 7: Stress Testing for Success 109

Chapter 8: Speaking Greek 125

Chapter 9: Accounting for Extremes 145

Part III: Managing Financial Risk 163

Chapter 10: Setting Limits.165

Chapter 11: Stopping Losses 181

Chapter 12: Controlling Drawdowns 199

Chapter 13: Hedging Bets 215

Part IV: Working in Financial Institutions 237

Chapter 14: Trading Places 239

Chapter 15: Banking on Risk 249

Chapter 16: Managing Assets and Portfolios 261

Chapter 17: Insuring Risk 271

Part V: Communicating Risk 283

Chapter 18: Reporting Risk 285

Chapter 19: Regulating Finance 299

Part VI: The Part of Tens 317

Chapter 20: Ten One-Minute Risk Management Tips 319

Chapter 21: Ten Days that Shook the (Financial) World 327

Chapter 22: Ten Great Risk Managers in History 341

Chapter 23: Ten Great Risk Books 349

Index 355

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