Bubble Value at Risk by Wong, Max C.Y. -- Read -- Imperial Library of Trantor

Index

Cover Contents Title Copyright Dedication About the Author Foreword Preface Acknowledgments Part One: Background

Chapter 1: Introduction

1.1 The Evolution of Riskometer 1.2 Taleb’s Extremistan 1.3 The Turner Procyclicality 1.4 The Common Sense of Bubble Value-at-Risk (BuVaR) Notes

Chapter 2: Essential Mathematics

2.1 Frequentist Statistics 2.2 Just Assumptions 2.3 Quantiles, VaR, and Tails 2.4 Correlation and Autocorrelation 2.5 Regression Models and Residual Errors 2.6 Significance Tests 2.7 Measuring Volatility 2.8 Markowitz Portfolio Theory 2.9 Maximum Likelihood Method 2.10 Cointegration 2.11 Monte Carlo Method 2.12 The Classical Decomposition 2.13 Quantile Regression Model 2.14 Spreadsheet Exercises Notes

Part Two: Value at Risk Methodology

Chapter 3: Preprocessing

3.1 System Architecture 3.2 Risk Factor Mapping 3.3 Risk Factor Proxies 3.4 Scenario Generation 3.5 Basic VaR Specification Notes

Chapter 4: Conventional VaR Methods

4.1 Parametric VaR 4.2 Monte Carlo VaR 4.3 Historical Simulation VaR 4.4 Issue: Convexity, Optionality, and Fat Tails 4.5 Issue: Hidden Correlation 4.6 Issue: Missing Basis and Beta Approach 4.7 Issue: The Real Risk of Premiums 4.8 Spreadsheet Exercises Notes

Chapter 5: Advanced VaR Methods

5.1 Hybrid Historical Simulation VaR 5.2 Hull-White Volatility Updating VaR 5.3 Conditional Autoregressive VaR (CAViaR) 5.4 Extreme Value Theory VaR 5.5 Spreadsheet Exercises Notes

Chapter 6: VaR Reporting

6.1 VaR Aggregation and Limits 6.2 Diversification 6.3 VaR Analytical Tools 6.4 Scaling and Basel Rules 6.5 Spreadsheet Exercises Notes

Chapter 7: The Physics of Risk and Pseudoscience

7.1 Entropy, Leverage Effect, and Skewness 7.2 Volatility Clustering and the Folly of i.i.d. 7.3 “Volatility of Volatility” and Fat Tails 7.4 Extremistan and the Fourth Quadrant 7.5 Regime Change, Lagging Riskometer, and Procyclicality 7.6 Coherence and Expected Shortfall 7.7 Spreadsheet Exercises Notes

Chapter 8: Model Testing

8.1 The Precision Test 8.2 The Frequency Back Test 8.3 The Bunching Test 8.4 The Whole Distribution Test 8.5 Spreadsheet Exercises Notes

Chapter 9: Practical Limitations of VaR

9.1 Depegs and Changes to the Rules of the Game 9.2 Data Integrity Problems 9.3 Model Risk 9.4 Politics and Gaming Notes

Chapter 10: Other Major Risk Classes

10.1 Credit Risk (and CreditMetrics) 10.2 Liquidity Risk 10.3 Operational Risk 10.4 The Problem of Aggregation 10.5 Spreadsheet Exercises Notes

Part Three: The Great Regulatory Reform

Chapter 11: Regulatory Capital Reform

11.1 Basel I and Basel II 11.2 The Turner Review 11.3 Revisions to Basel II Market Risk Framework (Basel 2.5) 11.4 New Liquidity Framework 11.5 The New Basel III 11.6 The New Framework for the Trading Book 11.7 The Ideal Capital Regime Notes

Chapter 12: Systemic Risk Initiatives

12.1 Soros’ Reflexivity, Endogenous Risks 12.2 CrashMetrics 12.3 New York Fed CoVaR 12.4 The Austrian Model and BOE RAMSI 12.5 The Global Systemic Risk Regulator 12.6 Spreadsheet Exercises Notes

Part Four: Introduction to Bubble Value-at-Risk (BuVaR)

Chapter 13: Market BuVaR

13.1 Why an Alternative to VaR? 13.2 Classical Decomposition, New Interpretation 13.3 Measuring the Bubble 13.4 Calibration 13.5 Implementing the Inflator 13.6 Choosing the Best Tail-Risk Measure 13.7 Effect on Joint Distribution 13.8 The Scope of BuVaR 13.9 How Good Is the BuVaR Buffer? 13.10 The Brave New World 13.11 Spreadsheet Exercises Notes

Chapter 14: Credit BuVaR

14.1 The Credit Bubble VaR Idea 14.2 Model Formulation 14.3 Behavior of Response Function 14.4 Characteristics of Credit BuVaR 14.5 Interpretation of Credit BuVaR 14.6 Spreadsheet Exercises Notes

Chapter 15: Acceptance Tests

15.1 BuVaR Visual Checks 15.2 BuVaR Event Timing Tests 15.3 BuVaR Cyclicality Tests 15.4 Credit BuVaR Parameter Tuning Notes

Chapter 16: Other Topics

16.1 Diversification and Basis Risks 16.2 Regulatory Reform and BuVaR 16.3 BuVaR and the Banking Book: Response Time as Risk 16.4 Can BuVaR Pick Tops and Bottoms Perfectly? 16.5 Postmodern Risk Management 16.6 Spreadsheet Exercises Note

Chapter 17: Epilogue: Suggestions for Future Research

Note

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