Finance and accounting Books

Book SynopsisThis book will provide a thorough introduction to the foreign exchange markets, looking at the main products through to the techniques used, coverage of the main participants, details of the various players, and an understanding of the jargon used in everyday dealings.Table of ContentsDisclaimer ix 1 Introduction 1 PART I MARKET OVERVIEW 7 2 A Brief History of the Market 9 3 MarketOverview 25 4 Major Participants 33 5 Roles Played 43 6 Purposes 45 PART II FOREIGN EXCHANGE PRODUCTS 49 7 Spot Foreign Exchange 51 8 Forward Contracts 59 9 Short- and Long-Dated Contracts 69 10 Broken-Dated Contracts 73 Glossary of Terms for Chapters 7 to 10 77 11 Non-Deliverable Forwards 81 12 Foreign Exchange Swaps 91 13 Currency Swaps 95 14 Foreign Exchange Options 99 15 Picturing Profit and Loss of Options 117 Glossary of Terms for Chapters 14 and 15 133 16 Foreign Exchange Futures 137 17 Exchange for Physical 145 PART III ESSENTIAL KNOWLEDGE 149 18 Foreign Exchange Dealing Rooms 151 19 Managing the Relationship with an Institution 155 20 Foreign Exchange Dealings 159 21 Foreign Exchange Market Orders 165 Glossary of Terms for Chapter 21 169 22 Electronic Foreign Exchange Trading 171 23 Margin Trading 179 PART IV FUNDAMENTALS AND TECHNICAL ANALYSIS 183 24 Fundamental versus Technical Approaches 185 25 Fundamental Analysis 191 26 Key Factors Impacting Currencies 197 27 Technical Analysis 207 Glossary of Terms for Chapters 24 to 27 221 28 Market Psychology 223 29 Final Remarks 231 Index 235

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Book SynopsisFully revised and updated from the hugely popular first edition, this book is an accessible and convenient one-volume introduction to international capital markets, ideal for those entering or planning to enter investment banking or asset management. As well as serving as an invaluable reference tool for professionals already working in the industry looking to extend their knowledge base it will also benefit all those working in trading, sales and support roles. Describing how the key products and markets work, who the principle participants are and their overall goals and objectives, Andrew Chisholm provides a thorough overview of the global capital markets. The book covers a wide range of equity, debt, foreign exchange and credit instruments as well as the principal derivative products. In a step-by-step fashion, making extensive use of real world cases and examples, it explains money markets, foreign exchange, bond markets, cash equity markets, equity valuation techniques, swapsTable of ContentsAcknowledgements xv 1 Introduction: The Market Context 1 1.1 Capital and the Capital Markets 1 1.2 The Euromarkets (International Capital Markets) 4 1.3 Modern Investment Banking 5 1.4 The Clients of Investment Banks 8 1.5 About this Book 11 2 The Money Markets 15 2.1 Chapter Overview 15 2.2 Domestic Money Markets 15 2.3 US Domestic Markets 16 2.4 The European Central Bank (ECB) 18 2.5 Sterling Money Markets 19 2.6 The Bank of Japan 20 2.7 Systemic Risks and Moral Hazards 20 2.8 Treasury Bills 21 2.9 Discounting Treasury Bills 21 2.10 US Commercial Paper 24 2.11 Credit Risk on USCP 25 2.12 Bankers’ Acceptances 26 2.13 The Eurocurrency Markets 26 2.14 Eurocurrency Loans and Deposits 27 2.15 Eurocurrency Interest and Day-Count 29 2.16 Eurocurrency Certificates of Deposit 30 2.17 CD Yield-to-Maturity 31 2.18 Euro-Commercial Paper 31 2.19 Repos and Reverses 32 2.20 Repo: Case Study 33 2.21 Other Features of Repos 33 2.22 Chapter Summary 34 3 The Foreign Exchange Market 37 3.1 Chapter Overview 37 3.2 Market Structure 37 3.3 FX Dealers and Brokers 38 3.4 Spot Foreign Exchange Deals 39 3.5 Sterling and Euro Quotations 40 3.6 Factors Affecting Spot FX Rates 41 3.7 Spot FX Trading 44 3.8 Spot Position Keeping 45 3.9 FX Risk Control 47 3.10 Cross-Currency Rates 49 3.11 Outright Forward FX Rates 50 3.12 Outright Forward FX Hedge: Case Study 51 3.13 Forward FX Formula 52 3.14 FX or Forward Swaps 53 3.15 FX Swap Two-Way Quotations 55 3.16 Chapter Summary 56 4 Major Government Bond Markets 59 4.1 Chapter Overview 59 4.2 Introduction to Government Bonds 59 4.3 Sovereign Risk 60 4.4 US Government Notes and Bonds 62 4.5 US Treasury Quotations 64 4.6 US Treasury Strips 66 4.7 Bond Pricing 67 4.8 Pricing Coupon Bonds: Examples 68 4.9 Detailed Bond Valuation: US Treasury 69 4.10 Bond Yield 71 4.11 Reinvestment Assumptions 72 4.12 Annual and Semi-Annual Bond Yields 73 4.13 UK Government Bonds 74 4.14 Japanese Government Bonds (JGBs) 77 4.15 Eurozone Government Bonds 77 4.16 Chapter Summary 78 5 Bond Price Sensitivity 81 5.1 Chapter Overview 81 5.2 Bond Market Laws 81 5.3 Other Factors Affecting Price Sensitivity 83 5.4 Macaulay’s Duration 83 5.5 Calculating Macaulay’s Duration 84 5.6 Duration of a Zero 85 5.7 Modified Duration 86 5.8 Price Value of a Basis Point 87 5.9 Convexity 88 5.10 Measuring Convexity 88 5.11 Convexity Behaviour 90 5.12 Portfolio Duration 91 5.13 Dedication 92 5.14 Immunization 94 5.15 Duration-Based Hedges 96 5.16 Convexity Effects on Duration Hedges 97 5.17 Chapter Summary 98 6 The Yield Curve 99 6.1 Chapter Overview 99 6.2 Real and Nominal Interest Rates 99 6.3 Compounding Periods 100 6.4 The Yield Curve Defined 101 6.5 Theories of Yield Curves 102 6.6 Zero Coupon or Spot Rates 104 6.7 Bootstrapping 106 6.8 Spot Rates and the Par Curve 108 6.9 Pricing Models Using Spot Rates 108 6.10 Forward Rates 109 6.11 Discount Factors 110 6.12 Chapter Summary 112 7 Credit Spreads and Securitization 113 7.1 Chapter Overview 113 7.2 Basics of Credit Spreads 113 7.3 The Role of the Ratings Agencies 115 7.4 Credit Spreads and Default Probabilities 117 7.5 Credit Default Swaps 118 7.6 Index Credit Default Swaps 121 7.7 Basket Default Swaps 122 7.8 Credit-Linked Notes 123 7.9 Securitization and CDOs 124 7.10 Rationale for Securitization 126 7.11 Synthetic CDOs 126 7.12 Chapter Summary 128 8 Equity Markets and Equity Investment 129 8.1 Chapter Overview 129 8.2 Comparing Corporate Debt and Equity 129 8.3 Additional Features of Common Stock 130 8.4 Hybrid Securities 131 8.5 Equity Investment Styles 132 8.6 Efficient Markets 133 8.7 Modern Portfolio Theory (MPT) 135 8.8 Primary Markets for Common Stock 138 8.9 Subsequent Common Stock Issues 140 8.10 Secondary Markets: Major Stock Markets 142 8.11 Depository Receipts 145 8.12 Stock Lending 146 8.13 Portfolio (Basket) Trading 148 8.14 Chapter Summary 148 9 Equity Fundamental Analysis 151 9.1 Chapter Overview 151 9.2 Principles of Common Stock Valuation 151 9.3 The Balance Sheet Equation 152 9.4 The Income Statement 154 9.5 Earnings Per Share (EPS) 156 9.6 Dividend Per Share (DPS) 157 9.7 Ratio Analysis 158 9.8 Liquidity Ratios 159 9.9 Profitability Ratios 159 9.10 Leverage Ratios 161 9.11 Investor Ratios and Valuation 162 9.12 Applying Valuation Multiples 163 9.13 Firm or Enterprise Value Multiples 165 9.14 Chapter Summary 166 10 Cash Flow Models in Equity Valuation 169 10.1 Chapter Overview 169 10.2 The Basic Dividend Discount Model 169 10.3 Constant Dividend Growth Models 170 10.4 The Implied Return on a Share 172 10.5 Dividend Yield and Dividend Growth 172 10.6 Price/Earnings Ratio 173 10.7 Stage Dividend Discount Models 175 10.8 Two-Stage Model: Example 175 10.9 The Capital Asset Pricing Model (CAPM) 176 10.10 Beta 177 10.11 Estimating the Market Risk Premium 178 10.12 The Equity Risk Premium Controversy 178 10.13 CAPM and Portfolio Theory 180 10.14 Free Cash Flow Valuation 183 10.15 Forecasting Free Cash Flows 184 10.16 Weighted Average Cost of Capital (WACC) 185 10.17 Residual Value 186 10.18 WACC and Leverage 187 10.19 Assets Beta Method 189 10.20 Company Value and Leverage 190 10.21 Chapter Summary 191 11 Interest Rate Forwards and Futures 193 11.1 Chapter Overview 193 11.2 Forward Rate Agreements (FRAs) 193 11.3 FRA Application: Case Study 194 11.4 Borrowing Costs with an FRA Hedge 196 11.5 FRA Market Quotations 197 11.6 The Forward Interest Rate 199 11.7 Financial Futures 201 11.8 CME Eurodollar Futures 203 11.9 Eurodollar Futures Quotations 203 11.10 Futures Margining 204 11.11 Margining Example: EURIBOR Futures on Eurex 205 11.12 Hedging with Interest Rate Futures: Case Study 208 11.13 Futures Strips 209 11.14 Chapter Summary 211 Appendix: Statistics on Derivative Markets 211 12 Bond Futures 213 12.1 Chapter Overview 213 12.2 Definitions 213 12.3 The CBOT 30-Year US Treasury Bonds Futures 213 12.4 Invoice Amount and Conversion Factors 214 12.5 Long Gilt and Euro-Bund Futures 216 12.6 Forward Bond Price 217 12.7 Carry Cost 218 12.8 The Implied Repo Rate 218 12.9 The Cheapest to Deliver (CTD) Bond 219 12.10 CTD Behaviour 221 12.11 Hedging with Bond Futures 222 12.12 Basis Risk 223 12.13 Hedging Non-CTD Bonds 224 12.14 Using Futures in Portfolio Management 225 12.15 Chapter Summary 226 13 Interest Rate Swaps 227 13.1 Chapter Overview 227 13.2 Swap Definitions 227 13.3 The Basic Interest Rate Swap Illustrated 228 13.4 Typical Swap Applications 230 13.5 Interest Rate Swap: Detailed Case Study 231 13.6 Interest Rate Swap Terms 233 13.7 Comparative Advantage 234 13.8 Swap Quotations and Spreads 236 13.9 Determinants of Swap Spreads 237 13.10 Hedging Swaps with Treasuries 238 13.11 Cross-Currency Swaps: Case Study 239 13.12 Cross-Currency Swap Revaluation 241 13.13 Chapter Summary 242 Appendix: Swap Variants 242 14 Interest Rate Swap Valuation 245 14.1 Chapter Overview 245 14.2 Valuing a Swap at Inception 245 14.3 Valuing the Swap Components 246 14.4 Swap Revaluation 247 14.5 Revaluation Between Payment Dates 248 14.6 The Forward Rate Method 249 14.7 Forward Rate Method on a Spreadsheet 251 14.8 Swap Rates and LIBOR Rates 251 14.9 Pricing a Swap from Futures 252 14.10 Hedging Interest Rate Risk on Swaps 256 14.11 Chapter Summary 257 15 Equity Index Futures and Swaps 259 15.1 Chapter Overview 259 15.2 Index Futures 259 15.3 Margining Procedures 260 15.4 Final Settlement and Spread Trades 262 15.5 Hedging with Index Futures: Case Study 263 15.6 Hedge Efficiency 264 15.7 Other Uses of Index Futures 265 15.8 Pricing an Equity Forward Contract 266 15.9 Index Futures Fair Value 267 15.10 The Basis 268 15.11 Index Arbitrage Trade 269 15.12 Running an Arbitrage Desk 270 15.13 Features of Index Futures 271 15.14 Equity Swaps 272 15.15 Managing the Risks on Equity Swaps 273 15.16 Structuring Equity Swaps 274 15.17 Benefits and Applications of Equity Swaps 275 15.18 Chapter Summary 276 16 Fundamentals of Options 277 16.1 Chapter Overview 277 16.2 Definitions 277 16.3 Basic Option Trading Strategies 278 16.4 Long Call: Expiry Payoff Profile 279 16.5 Short Call: Expiry Payoff Profile 281 16.6 Long Put: Expiry Payoff Profile 282 16.7 Short Put: Expiry Payoff Profile 284 16.8 Summary: Intrinsic and Time Value 284 16.9 CBOE Stock Options 285 16.10 CME S&P 500 Index Options 286 16.11 Stock Options on LIFFE 287 16.12 FT-SE 100 Index Options 288 16.13 Chapter Summary 289 Appendix: Exotic Options 289 17 Option Valuation Models 293 17.1 Chapter Overview 293 17.2 Fundamental Principles: European Options 293 17.3 Synthetic Forwards and Futures 295 17.4 American Options and Early Exercise 296 17.5 Binomial Trees 297 17.6 Expanding the Tree 300 17.7 Black-Scholes Model 302 17.8 Black-Scholes Assumptions 305 17.9 Chapter Summary 305 Appendix: Measuring Historic Volatility 306 18 Option Pricing and Risks 309 18.1 Chapter Overview 309 18.2 Intrinsic and Time Value Behaviour 309 18.3 Volatility Assumption and Option Pricing 311 18.4 Delta (Δ or δ) 312 18.5 Delta Behaviour 313 18.6 Gamma (Γ or γ ) 314 18.7 Readjusting the Delta Hedge 315 18.8 Gamma Behaviour 316 18.9 Theta (Θ) 318 18.10 Vega 319 18.11 Rho (p) and Summary of Greeks 319 18.12 Chapter Summary 321 Appendix: Delta and Gamma Hedging 322 19 Option Strategies 325 19.1 Chapter Overview 325 19.2 Hedging with Put Options 325 19.3 Covered Call Writing 329 19.4 Collars 330 19.5 Bull and Bear Spreads 332 19.6 Other Spread Trades 334 19.7 Volatility Revisited 336 19.8 Volatility Trading: Straddles and Strangles 338 19.9 Current Payoff Profiles 339 19.10 Profits and Risks on Straddles 341 19.11 Chapter Summary 343 20 Additional Option Applications 345 20.1 Chapter Overview 345 20.2 OTC and Exchange-traded Currency Options 345 20.3 Hedging FX Exposures with Options: Case Study 346 20.4 Pricing Currency Options 348 20.5 Interest Rate Options 349 20.6 Exchange-Traded Interest Rate Options 350 20.7 Caps, Floors, and Collars 352 20.8 Interest Rate Cap: Case Study 353 20.9 Pricing Caps and Floors: Black Model 355 20.10 Swaptions 357 20.11 Interest Rate Strategies 359 20.12 Convertible Bonds 360 20.13 CB Measures of Value 361 20.14 Conversion Premium and Parity 363 20.15 Convertible Arbitrage 364 20.16 Chapter Summary 366 Glossary of Financial Terms 369 Index 415

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Book SynopsisHow the actions of a few in Europe destroyed the prosperity of the many (and how it's happening again now in America) After the fall of the Roman Empire, vicious barbaric tribes including the Hunds lead by Atilla, the Mongols, Charlemagne and the Vikings invaded Europe, plundering property and destroying homes.Table of ContentsForeword ix Acknowledgments xiii Introduction 1 Part One: Great Barbarians of History 7 Chapter 1 Attila the Hun: The Scourge of God 9 Chapter 2 Charlemagne: The Clandestine Barbarian 21 Chapter 3 The Vikings: Savage Pirates, Savvy Traders 33 Chapter 4 Genghis Khan: Mighty Warrior 43 Part Two: Banks: The Barbarians of Money 55 Chapter 5 The Brotherhood of Power 57 Chapter 6 Race to the Bottom Line 77 Chapter 7 Say Goodbye to Gold 97 Chapter 8 The Gatekeepers 117 Chapter 9 Money for Nothing 139 Chapter 10 The Barbarians’ Powerful Ally 161 Part Three: The Barbarians of Wall Street 179 Chapter 11 The Scourge of Wall Street 181 Chapter 12 Epic Tool of Destruction 203 Chapter 13 The Brotherhood of Banks 221 Chapter 14 Wall Street Bloodlines 241 Part Four: Political Barbarians 265 Chapter 15 The Monied-Class Rulers and Demigods 267 Chapter 16 Barbarians in the Lobby 281 Chapter 17 Global Barbarians 297 Part Five: Protection Strategies 311 Chapter 18 Diversification: The Key to Wealth Protection 313 Chapter 19 Precious Metals: Inflation Protection Strategies 323 Chapter 20 Barbarians of Wealth, Castles of Currency 339 Chapter 21 Arm Yourself with Ultra-Resource-Rich Countries 355 Notes 373 About the Authors 413 Index 415

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Book SynopsisExperts from NYU Stern School of Business analyze new financial regulations and what they mean for the economy The NYU Stern School of Business is one of the top business schools in the world thanks to the leading academics, researchers, and provocative thinkers who call it home. In Regulating Wall Street: The New Architecture of Global Finance, an impressive group of the Stern school's top authorities on finance combine their expertise in capital markets, risk management, banking, and derivatives to assess the strengths and weaknesses of new regulations in response to the recent global financial crisis. Summarizes key issues that regulatory reform should address Evaluates the key components of regulatory reform Provides analysis of how the reforms will affect financial firms and markets, as well as the real economy The U.S. Congress is on track to complete the most significant changes in financial regulation since the 1930Trade Review"A fascinating, lively, and thoroughly readable guide to the Dodd-Frank Act that pierces the cloud of confusion that hangs over so much of the financial reform debate. It is extremely timely and valuable, and should be required reading for all policymakers, investors, and students of finance. What makes the book so valuable is that it not only analyzes the scope of the Act, in a punchy, lively style, but it also discusses its potential impact. More important, the book analyzes what is not covered in the Act—and where the potential challenges to the financial system still lie." —Gillian Tett, U.S. Managing Editor, Financial Times "The crisis of 2008 confronted even well-educated Americans with a flood of incomprehensible financial vocabulary, describing novel financial institutions and practices most of us had never heard of before. Now we have the 2,300-page Dodd-Frank Act, designed to provide the needed repair. Will it do so? What else will it do? How can we even start to think about these basic questions? Regulating Wall Street addresses these questions in a clear, direct style, taking us through the many parts of the Act one at a time, and providing informed, cogent economic analysis of each. A valuable standard source for future discussion." —Robert E. Lucas, University of Chicago, 1995 Nobel Laureate "Take the faculty of one of the best finance departments in the world. Ask them to analyze the new U.S. legislation on financial regulation, and to think about what the new law gets right, what it gets wrong, and how it is likely to shape the future of the financial system. With a bit of luck, you get this very impressive book. An absolute must-read." —Olivier Blanchard, Chief Economist, International Monetary Fund "Regulating Wall Street goes a long way toward clarifying the intent of the various provisions of the Dodd-Frank Act and evaluating both its effectiveness and limitations. The need for effective implementation by agencies is appropriately emphasized. Not a quick read, a useful reference work on an enormously complex piece of legislation, dealing with an even more complex financial reality." —Paul Volcker, Chairman of the Economic Recovery Advisory Board and former Chairman of the Federal Reserve (1979–1987) “There are many villains in the story of the recent crisis and much written to name them, describe them and even curse them. . . If you want to know how to fix the problem, I highly recommend ‘Regulating Wall Street,’ from New York University’s Stern School of Business. . . In the excellent book, ‘Regulating Wall Street,’ several of the studies indicate that there are few synergies among financial activities that could lead to economies of scope. The studies also demonstrate that multiple functions in large, complex firms can actually increase systemic risk. Moreover, they suggest that the spun-off activities could thrive without explicit or implied government support. The conclusion in this book is that separating activities in this manner, together with stronger resolution processes and better capital standards, would do much to strengthen our financial system, making it more accountable and stronger.” —Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City "Readers should read Regulating Wall Street to understand why, in the face of market failures and copious evidence that Wall Street is unproductive, Congress and regulators labored mightily to resurrect the financial intermediation racket just as it existed on September 12, 2008." (Tax Notes) “If you want to know how to fix the problem, I highly recommend Regulating Wall Street, from New York University’s Stern School of Business.” —Karl Denninger, Seeking Alpha “One refreshing sign of hope for constructive change is that economists, some of whose theories had much to do with a light regulatory approach toward derivatives and the housing bubble, are increasingly producing research calling for stricter guidelines then Dodd-Frank or the Obama administration. Regulating Wall Street presents a wide range of new research supporting stronger regulations than Dodd-Frank recommends, such as . . . tax proposals. . . In the prologue of Regulating Wall Street, the editors, hardly known as progressives, remind financiers how useful strong regulations were in the past. . . We would be better off if the powers on Wall Street would remember. . . “ (New York Review)Table of ContentsForeword xi Preface xvii Prologue: A Bird’s-Eye View The Dodd-Frank Wall Street Reform and Consumer Protection Act 1 Viral V. Acharya, Thomas Cooley, Matthew Richardson, Richard Sylla, and Ingo Walter PART ONE Financial Architecture 33 Chapter 1 The Architecture of Financial Regulation 35 Thomas Cooley and Ingo Walter Chapter 2 The Power of Central Banks and the Futureof the Federal Reserve System 51Thomas Cooley, Kermit Schoenholtz, George David Smith, Richard Sylla, and Paul Wachtel Chapter 3 Consumer Finance Protection 73 Thomas Cooley, Xavier Gabaix, Samuel Lee, Thomas Mertens, Vicki Morwitz, Shelle Santana, Anjolein Schmeits, Stijn Van Nieuwerburgh, and Robert Whitelaw PART TWO Systemic Risk 85 Chapter 4 Measuring Systemic Risk 87 Viral V. Acharya, Christian Brownlees, Robert Engle,Farhang Farazmand, and Matthew Richardson Chapter 5 Taxing Systemic Risk 121 Viral V. Acharya, Lasse Pedersen, Thomas Philippon,and Matthew Richardson Chapter 6 Capital, Contingent Capital, and Liquidity Requirements 143 Viral V. Acharya, Nirupama Kulkarni, and Matthew Richardson Chapter 7 Large Banks and the Volcker Rule 181 Matthew Richardson, Roy C. Smith, and Ingo Walter Chapter 8 Resolution Authority 213 Viral V. Acharya, Barry Adler, Matthew Richardson,and Nouriel Roubini Chapter 9 Systemic Risk and the Regulation of Insurance Companies 241 Viral V. Acharya, John Biggs, Hanh Le, Matthew Richardson, and Stephen Ryan PART THREE Shadow Banking 303 Chapter 10 Money Market Funds: How to Avoid Breaking the Buck 305 Marcin Kacperczyk and Philipp Schnabl Chapter 11 The Repurchase Agreement (Repo) Market 319 Viral V. Acharya and T. Sabri O¨ ncu¨ Chapter 12 Hedge Funds, Mutual Funds, and ETFs 351 Stephen Brown, Anthony Lynch, and Antti Petajisto Chapter 13 Regulating OTC Derivatives 367 Viral V. Acharya, Or Shachar, and Marti Subrahmanyam PART FOUR Credit Markets 427 Chapter 14 The Government-Sponsored Enterprises 429 Viral V. Acharya, T. Sabri O¨ ncu¨ , Matthew Richardson, Stijn Van Nieuwerburgh, and Lawrence J. White Chapter 15 Regulation of Rating Agencies 443 Edward I. Altman, T. Sabri O¨ ncu¨ , Matthew Richardson, Anjolein Schmeits, and Lawrence J. White Chapter 16 Securitization Reform 469 Matthew Richardson, Joshua Ronen, and Marti Subrahmanyam PART FIVE Corporate Control 491 Chapter 17 Reforming Compensation and Corporate Governance 493 Jennifer Carpenter, Thomas Cooley, and Ingo Walter Chapter 18 Accounting and Financial Reform 511 Joshua Ronen and Stephen Ryan Epilogue 527 About the Authors 531 About the Blog 535 Index 537

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Book SynopsisAchieving market consistency can be challenging, even for the most established finance practitioners. In Market Consistency: Model Calibration in Imperfect Markets, leading expert Malcolm Kemp shows readers how they can best incorporate market consistency across all disciplines. Building on the author''s experience as a practitioner, writer and speaker on the topic, the book explores how risk management and related disciplines might develop as fair valuation principles become more entrenched in finance and regulatory practice. This is the only text that clearly illustrates how to calibrate risk, pricing and portfolio construction models to a market consistent level, carefully explaining in a logical sequence when and how market consistency should be used, what it means for different financial disciplines and how it can be achieved for both liquid and illiquid positions. It explains why market consistency is intrinsically difficult to achieve with certainty in some types of aTable of ContentsPreface. Acknowledgements. Abbreviations. Notation. 1 Introduction. 1.1 Market consistency. 1.2 The primacy of the ‘market. 1.3 Calibrating to the ‘market’. 1.4 Structure of the book. 1.5 Terminology. 2 When is and when isn’t Market Consistency Appropriate? 2.1 Introduction. 2.2 Drawing lessons from the characteristics of money itself. 2.3 Regulatory drivers favouring market consistent valuations. 2.4 Underlying theoretical attractions of market consistent valuations. 2.5 Reasons why some people reject market consistency. 2.6 Market making versus position-taking. 2.7 Contracts that include discretionary elements. 2.8 Valuation and regulation. 2.9 Marking-to-market versus marking-to-model. 2.10 Rational behaviour? 3 Different Meanings given to ‘Market Consistent Valuations’. 3.1 Introduction. 3.2 The underlying purpose of a valuation. 3.3 The importance of the ‘marginal’ trade. 3.4 Different definitions used by different standards setters. 3.5 Interpretations used by other commentators. 4 Derivative Pricing Theory. 4.1 Introduction. 4.2 The principle of no arbitrage. 4.3 Lattices, martingales and Îto calculus. 4.4 Calibration of pricing algorithms. 4.5 Jumps, stochastic volatility and market frictions. 4.6 Equity, commodity and currency derivatives. 4.7 Interest rate derivatives. 4.8 Credit derivatives. 4.9 Volatility derivatives. 4.10 Hybrid instruments. 4.11 Monte Carlo techniques. 4.12 Weighted Monte Carlo and analytical analogues. 4.13 Further comments on calibration. 5 The Risk-free Rate. 5.1 Introduction. 5.2 What do we mean by ‘risk-free’? 5.3 Choosing between possible meanings of ‘risk-free’. 6 Liquidity Theory. 6.1 Introduction. 6.2 Market experience. 6.3 Lessons to draw from market experience. 6.4 General principles. 6.5 Exactly what is liquidity? 6.6 Liquidity of pooled funds. 6.7 Losing control. 7 Risk Measurement Theory. 7.1 Introduction. 7.2 Instrument-specific risk measures. 7.3 Portfolio risk measures. 7.4 Time series-based risk models. 7.5 Inherent data limitations applicable to time series-based risk models. 7.6 Credit risk modelling. 7.7 Risk attribution. 7.8 Stress testing. 8 Capital Adequacy. 8.1 Introduction. 8.2 Financial stability. 8.3 Banking. 8.4 Insurance. 8.5 Pension funds. 8.6 Different types of capital. 9 Calibrating Risk Statistics to Perceived ‘Real World’ Distributions. 9.1 Introduction. 9.2 Referring to market values. 9.3 Backtesting. 9.4 Fitting observed distributional forms. 9.5 Fat-tailed behaviour in individual return series. 9.6 Fat-tailed behaviour in multiple return series. 10 Calibrating Risk Statistics to ‘Market Implied’ Distributions. 10.1 Introduction. 10.2 Market implied risk modelling. 10.3 Fully market consistent risk measurement in practice. 11 Avoiding Undue Pro-cyclicality in Regulatory Frameworks. 11.1 Introduction. 11.2 The 2007-09 credit crisis. 11.3 Underwriting of failures. 11.4 Possible pro-cyclicality in regulatory frameworks. 11.5 Re-expressing capital adequacy in a market consistent framework. 11.6 Discount rates. 11.7 Pro-cyclicality in Solvency II. 11.8 Incentive arrangements. 11.9 Systemic impacts of pension fund valuations. 11.10 Sovereign default risk. 12 Portfolio Construction. 12.1 Introduction. 12.2 Risk-return optimisation. 12.3 Other portfolio construction styles. 12.4 Risk budgeting. 12.5 Reverse optimisation and implied view analysis. 12.6 Calibrating portfolio construction techniques to the market. 12.7 Catering better for non-normality in return distributions. 12.8 Robust optimisation. 12.9 Taking due account other investors’ risk preferences. 13 Calibrating Valuations to the Market. 13.1 Introduction. 13.2 Price formation and price discovery. 13.3 Market consistent asset valuations. 13.4 Market consistent liability valuations. 13.5 Market consistent embedded values. 13.6 Solvency add-ons. 13.7 Defined benefit pension liabilities. 13.8 Unit pricing. 14 The Final Word. 14.1 Conclusions. 14.2 Market consistent principles. Bibliography. Index.

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Book SynopsisFocusing on the core value levers companies can apply in the decision and design phase of capital investments, this book is the first to cover this topic in a holistic, practical, and strategic manner, and is based on McKinsey's extensive industry analysis and research.Table of ContentsAcknowledgements. About the Authors. PART I WHY INVESTMENTS MATTER. 1 Introduction. 1.1 Investments: the forgotten value lever. 1.1.1 The early bird catches the worm. 1.2 A bird’s-eye view of the book content. 1.2.1 Part I: Why investments matter. 1.2.2 Part II: Getting investments right. 1.2.3 Part III: Right allocation: Managing a company's investment portfolio. 1.3 Why investments matter: the importance and structure of capital investments. 1.3.1 The relevance of capital investments. 1.3.2 The structure of capital investments. 1.3.3 Time dependence of capital investments. 1.3.4 The future of capital investments. 1.4 Summary. Appendix 1.1: Wavelet analysis: Extracting frequency information from investment timelines. References. PART II GETTING INVESTMENTS RIGHT. 2 Right Positioning: Managing an Asset’s Exposure to Economic Risk. 2.1 Preface. 2.2 Asset exposure determines the achievable return on an investment. 2.3 Five levels of protection determine the asset exposure. 2.4 A simple scoring metric to measure asset exposure. 2.5 Quantitative asset exposure analysis shows high correlation with ROIC at all levels. 2.5.1 Using exposure level analysis for benchmarking. 2.6 Strategies to reduce asset exposure. 2.6.1 Strategy 1: Create public-private, win-win situations in natural monopoly environments. 2.6.2 Strategy 2: Foster regulatory conditions that enable sufficient investment levels. 2.6.3 Strategy 3: Create the right structural conditions and ensure fair access to scarce resources. 2.6.4 Strategy 4: Establish protection for intellectual property. 2.6.5 Strategy 5: Achieve a strong commercial position. 2.6.6 Strategy 6: Minimize fixed capital costs or outsource asset ownership (go "asset light"). 2.7 Summary. 3 Right Technology: How to Optimize Innovation Timing and Risks. 3.1 Capital investments in technology innovation. 3.1.1 Technology analysis. 3.1.2 Assess risks. 3.1.3 Mitigating technology risks. 3.2 Summary. 4 Right Timing: How Cyclicality Affects Return on Investments and What Companies Can Do About It. 4.1 How cyclicality destroys value. 4.2 Industry drivers of cyclicality. 4.2.1 Impact of investment lead times. 4.2.2 Slow-to-no market growth. 4.2.3 High price sensitivity. 4.2.4 Investment timing with respect to the cycle. 4.3 Developing an economic model of cyclicality. 4.3.1 A fundamental law of economic cycles. 4.3.2 Base parameters of simple economic oscillations. 4.3.3 Reaction of cyclical systems to external "excitation". 4.3.4 Economic cycles with more than one player present. 4.4 Measures to cope with cyclicality. 4.4.1 Reaction delay. 4.4.2 Reaction strength. 4.4.3 “Jokers” that can help beat the cycle. 4.4.4 Where no joker is available. 4.5 Summary. Appendix 4A: A differential equation for economic cyclicality. Reference. 5 Right Size: Balancing Economies and Diseconomies of Scale. 5.1 Introduction: The role of scale in determining profitability. 5.2 Assessing economies of scale. 5.2.1 Fixed cost leverage. 5.2.2 Decreasing unit costs. 5.2.3 Equipment utilization/chunkiness of capacity. 5.2.4 Critical size. 5.3 Determining diseconomies of scale. 5.3.1 Cost elements. 5.4 Risk elements. 5.4.1 Utilization risks. 5.4.2 Market reaction risks. 5.4.3 Technology risks. 5.4.4 Timing risks. 5.5 An approach for finding the "sweet spot". 5.5.1 Scale effect model. 5.6 Real-life examples. 5.6.1 Automotive industry case example. 5.6.2 Base chemicals case example. 5.7 Summary. Reference. 6 Right Location: Getting the Most from Government Incentives. 6.1 Government incentives: An overview. 6.1.1 Creating public-private, win-win situations. 6.2 Common types of incentive instruments. 6.2.1 Subsidies. 6.2.2 Financing support. 6.2.3 Tax relief. 6.2.4 Other types of government incentives. 6.3 The financial impact of incentives: A modeling approach. 6.3.1 General impact of subsidies. 6.3.2 General impact of financing support. 6.3.3 General impact of tax relief. 6.3.4 Specific impact of incentives on different industries. 6.4 Geographical differences in incentive structures. 6.5 Managing government incentives. 6.6 Summary. References. 7 Right Design: How to Make Investments Lean and Flexible. 7.1 Lean design as a competitive advantage. 7.1.1 The lean way: Moving from capital investment projects to a lean design system. 7.2 The three dimensions of a lean capital investment system. 7.3 Dimension 1: The technical system. 7.3.1 Start with project objectives, design princisples, and target setting. 7.3.2 Value engineering and lean tools. 7.3.3 Design optimization. 7.3.4 From the basic design to start of production. 7.3.5 Anchoring tools and practices to formal standards. 7.4 Dimensions 2 & 3: Management infrastructure, mindset and behavior. 7.4.1 Project organization and performance management. 7.4.2 Institutionalization and learning. 7.4.3 Adapting the system to local specifics: Project design cannot be "one size fits all". 7.4.4 Getting started. 7.5 Flexibility: Just what customers and the company need and no more. 7.5.1 Macro-level flexibility: modularity in plant design to ensure flexible, cost-efficient assets. 7.5.2 Midi-level flexibility in plant design: cater for product portfolio diversity. 7.5.3 Micro-level flexibility in plant design: design for iso-productivity. 7.6 How to avoid creating a front-page disaster: Anticipating what can go wrong. 7.6.1 Performance management and decision making. 7.6.2 Tools which every company and project team need to master. 7.6.3 Cross-functional coordination. 7.7 Summary. References. 8 Right Financing: Shaping the Optimal Finance Portfolio. 8.1 Why Financing Matters. 8.2 Three-Step Financing Approach. 8.2.1 Step 1: Evaluating the investment's cash flow parameters. 8.2.2 Step 2: Assessing investment risks. 8.2.3 Step 3: Composing the financing portfolio. 8.3 Summary. References. PART III. 9 Right Allocation: How to Allocate Money Within the Company. 9.1 Key requirements for capital allocation. 9.2 Four models of the corporate center role in shaping the investment portfolio. 9.3 Capital allocation approach for operators and strategic controllers. 9.3.1 Step 1: Treat special projects as high priority. 9.3.2 Step 2: Allocate remaining capital to business units. 9.3.3 Step 3: Business units distribute capital to individual investments. 9.3.4 Step 4: Implement a capital assurance process. 9.3.5 Improving the "capital allocation key". 9.3.6 Capital allocation backbone. 9.4 Capital allocation approach for strategic architects and financial holding structures. 9.5 Summary. References. Index.

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Book SynopsisBuffett has generously endowed us all with a sensible and intelligent roadmap for investing. -- Robert G Hagstrom Warren Buffett -- The Oracle of Everything. He has been right about the stock market, rotten accounting, CEO greed, and corporate governance. The rest of us are just catching on.Trade Review"Über den legendären amerikanischen Investor Warren Buffet wurden breeits zahlreiche Bücher geschrieben - nun erscheint seine Biograhie erstmals als Comic. Die erstaunliche Karriere des ehemaligen Zeitungsträgers, der zum erfolgreichsten Einzelinvestor aller zeiten wurde, mutet als Fabel an. Das Buch des Japaners ayano Morio verleiht Buffett zusätzlich eine Superheld-Aura: Er trifft immer die richtigen Entscheidungen und löst jeeds Problem sofort - wie ein richtiger Superman des Finanzgewerbes. Fazit: unkritisch, aber amüsant." Der Handel, Februar 2005 "... Die englischen Texte sind leicht zu lesen, die Illustrationen sind witzig. Auch der Lernwert des Comics ist nicht zu unterschätzen ..." FAZ, 6. März 2005Table of ContentsINTRODUCTION VII CHAPTER 1 Getting Started 1 CHAPTER 2 Meeting Benjamin Graham 18 CHAPTER 3 Discovering Intangible Value: The Amex Affair 41 CHAPTER 4 The Warren and Charlie Show 49 CHAPTER 5 Buffett Dissolves the Partnerships 68 CHAPTER 6 See's Candies 72 CHAPTER 7 A Platonic Affair 80 CHAPTER 8 The Return to GEICO 86 CHAPTER 9 Buffett Saves Salomon Brothers 102 CHAPTER 10 Back Home 148 CHRONOLOGY 157 BIBLIOGRAPHY 159

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Book SynopsisSynthetic securitization and structured products are revolutionizing the financial industry and changing the way banks, institutional investors and securities traders do business both domestically and globally. While potentially beneficial, these important instruments are complex structures that are often misunderstood and frequently mishandled.Table of ContentsPreface to the Second Edition. Preface to the First Edition. Part 1: Securitization: Concepts & Markets. 1. Securitization and structured finance. Basic meaning of securitization. Securitization of receivables. Securitization and asset-backed finance. Securitization and structured finance. The big picture of securitization of finance. Securitization as a tool of risk management. Economic impact of securitization. The alchemy of securitization: Is the sum of parts more than the whole? Risks inherent in securitization. Securitization terminology. 2. Securitization: Methodology, structures, Motivators and Demotivators. Modus operandi of securitization briefly explained. Economic substance of securitization: where does the alchemy lie? Features of securitization of receivables. Securitization and factoring. Securitization and ring fencing. Asset classes. Broad types of securitization structures. Direct portfolio transfers. Pass-through structure. Pay-through structure. Collateralized mortgage obligation bonds. Future flows of securitization. Advantages of securitization for the issuer. Advantages to the investors. Threats in securitization. 3. The world of securitization. Part II: Financial Substance and Ratings. History of securitization. The life cycle of securitization. Present state of securitization (US, Europe, Central America, Asia, The Pacific). Trends in global securitization. 4. Structuring and credit-enhancing securitization transactions. Basics of securitization structuring. Structuring variables. Parties involved Steps in a securitization transaction. Credit enhancements. Originator credit enhancements. Structural credit enhancements. Third-party credit enhancements. Sizing of credit enhancements. Liquidity enhancements. Pay-down structure. Maturity of the securities. Profit extraction devices. Cashflow waterfall. 5. Understanding the nature and risks of asset-backed securities. Asset-backed securities and the underlying collateral. Risks in asset-backed securities. Modelling of asset risks. 6. Understanding prepayment risk in asset backed securities. Prepayment as a risk. Prepayment risk in asset-backed securities. Prepayment risk in mortgage pools. Prepayment modeling. Static prepayment models. The PSA prepayment model. The CPR and the other static models. Dynamic or econometric prepayment models. Projection of interest rates. Prepayments for adjustable rate mortgages. Prepayment model for commercial mortgages. Prepayment models for non-U.S. pools. 7. Understanding default risk in asset backed securities. Nature of default risk – default as an option. The option to default on mortgages. Default rates as a function of seasoning. Default risk for different securities. 8. Cashflow modeling for asset-backed securities. Constructing the cashflow model. Understanding the asset and its repayment over time. The factors that affect asset cashflows. The factors that affect the factors that affect cashflow. Understanding transaction structure. Modelling a real life case. Stress testing the model. 9. Securitization: Financial evaluation for the originator. Securitization: The quantifiables and the non-quantifiables. Securitization versus the unknown. The NPV of originator’s residual interest. Impact of prepayment. Factors affecting originator’s residual interest. Expected value of originator’s residual interest. 10. Investor evaluation of asset-backed securities. Spreads inherent in asset-backed securities. Understanding of duration. Understanding of convexity. Impact of prepayment on ABS investments. Computation of option-adjusted spread. Understanding default risk. 11. Rating of securitization transactions. Structured finance ratings vs other fixed income ratings. Rating agency concerns. The rating process. Rating models. Differences between structured finance and corporate finance ratings. What credit ratings do not rate. Servicer evaluation. Role of ratings in structured finance. Part 2: Securitization: Asset classes and applications 12. Residential mortgage-backed securitization. Mortgage funding systems. Government support to housing finance. Why secondary mortgage markets. Origin of the secondary mortgage markets. Overview of the US RMBS market. Secondary mortgage market in other countries. Structuring of RMBS transactions. Case studies of RMBS. Home equity loans securitization. Manufactured home loans. Investing in the MBS market. Mortgage bonds. 13. Commercial mortgage-backed securitization. What is CMBS? CMBS market. Types of CMBS. Structure of a CMBS transaction. Case study: GMAC’s 2001WTC transaction. Case study: Canary Wharf – a Typical UK CMBS. Investing in CMBS: Performance of CMBS. 14. Credit cards securitization. Nature of credit card debt. An overview of the market. Transaction structure. Development of the master trust structure. Components of a credit card structure. 15. Auto loan securitization. Forms of car funding. Auto loans securitization market. Collateral quality. Typical structures. Specific issues in auto loan securitization. Case Study – Daimler-Chrysler Auto Trust. 16. Equipment Lease Securitization. Investing in equipment lease securitizations. 17. Collateralized Debt Obligations. What is a CDO? Types of CDOs. Growth of the CDO market. Balance sheet CDOs. Arbitrage CDOs. Market value CDOs. Ramp up period. The CDO manager. The CDO investors. The CDO trustee. Credit enhancer ad swap counterparty. Managing the assets of CDOs. Asset quality tests. Cashflow coverage tests. Resecuritization or structured finance CDOs. Distressed debt CDOs. Hedge fund CDOs or fund of funds. Investing in CDOs. Risks in CDO investment – structure and collateral risks. Taxation of CDOs. Legal issues specific to CDOs. CDOs and index trading. Current problems facing the CDO sector. Rating agencies approaches to CDOs. 18. Asset-backed commercial paper. Genesis of asset-backed commercial paper. The ABCP market. Types of ABCP conduits. ABCP collateral. Credit enhancements structure. Liquidity support. Parties to an ABCP program. Rating of ABCP conduits. Case study: Spinnaker Capital ABCP Program. 19. Future flows securitization. What future flows are securitizable. Why future flow securitization? Types of future flow deals. Structural features. Existing asset, future income: A case of toll revenues securitization. Servicing risks in future flows. The future flows market. Legal taxation and accounting issues. Experience with future flows. 20. Whole business and operating revenues securitization. Market development. Methodology. Structural and credit enhancements. The legal basis. Businesses where whole business securitization is possible. Why SPV in a whole business structure. Case study: South East Water (Finance) Ltd. 21. Other miscellaneous asset classes. Securitization of intellectual property. Securitization of non-performing loans. Government receivables. Financial future flows. Inventory securitization. Insurance securitization. 22. Synthetic securitization and other risk transfer devices. Cash vs synthetic securitization. Advantages of synthetic securitization over cash transfers. Inefficiencies of a synthetic securitization. Distinction between cash-funded and synthetic securitization. Balance sheet and arbitrage synthetic securitization. Elements of balance sheet synthetic securitization. Arbitrage synthetic CDOs. OC and IC triggers for synthetic CDOs. Pay-down structure. Evolution and growth of synthetic securitization. Investing in synthetic CDOs. Insurance risk securitization and other methods of alternative risk transfer. Part IV: Technical and Operational Aspects. 23. Legal issues in securitization. The significance of legal issues in securitization. Why are securitization legal issues complicated? Securitization: The big picture. What are the main legal issues? Securitization and loan obligations. The true sale question. Case law on true sale. The factors that make or mar a true sale. Factors in determination of a sale. Methods of transferring receivables. Legal system and assignment of receivables. Procedure for assignment of actionable claims. Equitable assignment. Stamp duty on securitization. Avoiding stamp duty by shifting jurisdiction. Stamp duties on transfer of securities of the SPV. Stamp duty on securitization transactions: Indian case. Stamp duty relaxations in other countries. Secured loan structures. Legal issues in synthetic structures. Bankruptcy remote securitization. Organizational forms of SPVs. Bankruptcy remoteness of SPVs. Consolidation of the SPV. Legal rights of the investor: Legal nature of the investor’s right. Legal nature of a future flow securitization. Legal issues in arbitrage transactions. Ideal legal framework for securitization. UNCIRAL initiative for uniform law on assignment of receivables. 24. Legal documentation for securitization. Basic structure of documentation. The pooling and servicing agreement. Servicing covenants. The trust deed. 25 Operational issues in securitization. Significance of operational risk. Types of servicers. Servicer strengths. Servicer qualities. Servicing transition. Backup service. Reporting by the servicer. Role of trustees in operation of the transaction. Fraud risk. 26 Tax issues in securitization. Concept in tax neutrality or tax transparency. Substance of the transaction: sale or financing. Tax treatment in the originators’ hands. Tax treatment of the Special Purpose Vehicle (SPV). U.S. taxation rules for securitization. Thin capitalization rules and SPV taxation. Taxation of SPVs where no specific provisions exist: India. Deductibility of expenses by the SPV. Tax treatment in the hands of the investors. Withholding taxes. 27. Accounting for securitization. Securitization accounting in flux. The basic accounting rule: Substance over form. Development of accounting principles on securitization. Sale treatment vs loan treatment. Pre-conditions for sale treatment. Pre-conditions for sale accounting. Qualifying SPV. Sale treatment – balance sheet and revenue impact. Retained interest valuation in a real life case. Gain on sale accounting. IAS 39 Revised and securitization. Financing treatment and linked treatment. Comparative view of sale and financing treatment. Disclosures by the originator. Accounting by the SPV. Consolidation of SPV accounts with the originator. Consolidation of variable interest entities under U.S. Attaining sale treatment for accounts and loan treatment for taxes. Accounting for revolving asset securitizations. Accounting for future flow securitization. Investor accounting. Other securitization accounting standards. Servicing rights and QSPE amendments. 28. Regulation AB: Securities regulation on asset-backed securities. 29. Regulatory and economic capital in securitization. The regulator’s concerns. Background of regulatory concerns. Overview of Basle-II norms. Basic approach to securitization. Pre-requisites for regulatory relief. Generic principles of securitization. Capital rules under standardized approach. Internal ratings-based approach. U.S. regulatory requirements: Historical. Basle IA. FSA UK’s guidelines for capital relief. EU capital directive. Regulatory requirements in other countries. Securitization and economic capital. 30. Investing in securitization instruments. Part V: Investing in Asset-backed Securities. Distinguishing between securitization instruments and other fixed income investments. Investors’ concerns in securitization investments. Performance of securitization investments. Evaluation of an ABS investment. Index. Tables of Cases.

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Book SynopsisPraise for Energy & Environmental Hedge Funds: The New Investment Paradigm I highly recommend this book for those investors interested in energy and environmental hedge funds. It is a great handbook on these topics. The authors make a difficult subject easy for investors to understand. Energy and Environmental Hedge Funds are both the newest and next area for hedge fund investment and diversification. Lisa Vioni, President, HedgeConnection.com Peter Fusaro and Gary Vasey have done a great jo9b in compiling all of the background information that a newcomer to energy investing should have. This insightful book helps in determining how best to gain exposure to the rapidly changing energy trading sector. Raj Mahajan, President & Co-Founder, SunGard Kiodex The entry of opportunistic hedge funds into the energy sector is creating a sea of change for the industry. Fueled by pension funds and institutional investorsTable of ContentsIntroduction. Acknowledgements. Abbreviated Terms Used in this Book. 1. The New Investors in Energy. 2. What are Energy and Environmental Hedge Funds? 3. Why are Hedge Funds Attracted to Energy and the Environment? 4. The Energy Complex and Investment Opportunities. 5. The Energy Hedge Funds. 6. Impacts and Evidence of Hedge Fund Activity in Energy. 7. Green Hedge Funds: Trading the Environment. 8. Weather Hedge Funds. 9. Energy and Natural Resources Fund of Hedge Funds. 10. Energy Indexes. 11. A Five-year Bull Market in Energy? Glossary. Index.

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Book SynopsisUpdated coverage of structured credit products with in-depth coverage of the latest developments Structured credit products are one of today''s fastest growing investment and risk management mechanisms, and a focus of innovation and creativity in the capital markets. The building blocks of these products are credit derivatives, which are among the most widely used products in finance. This book offers a succinct and focused description of the main credit derivative instruments, as well as the more complex products such as synthetic collateralized debt obligations. This new edition features updated case studies from Europe and Asia, the latest developments in synthetic structures, the impact of the subprime meltdown,along with models and teaching aids. Moorad Choudhry returns with this excellent update of the credit derivatives market. The second edition of his classic work is, like the subject matter itself, at the forefront of the financial industry. It deserves a wide readeTable of ContentsForeword Professor Darrell Duffie, Stanford University xi Preface xv Acknowledgements xix About the Author xxi Prologue The 2007–2008 credit and liquidity crunch: Impact on structured credit markets 1 Part I Credit risk and credit derivative instruments 21 Chapter 1 Credit risk 27 Chapter 2 Credit derivatives I: Unfunded instruments 57 Chapter 3 Credit derivatives II: Funded instruments 163 Chapter 4 Credit analysis and relative value measurement 185 Chapter 5 Credit derivatives III: Applications 203 Chapter 6 Credit derivatives pricing and valuation 227 Chapter 7 Credit default swap pricing 251 Chapter 8 The asset swap—credit default swap basis I: The asset swap pricing of credit default swaps 281 Chapter 9 The credit default swap basis II: Analysing the relationship between cash and synthetic markets 293 Chapter 10 Trading the credit default swap basis: Illustrating positive and negative basis arbitrage trades 343 Chapter 11 Syndicated loans, loan-only credit default swaps and CDS legal documentation 371 Part II Structured credit products and synthetic securitisation 403 Chapter 12 An introduction to securitisation 405 Chapter 13 Synthetic collateralised debt obligations 445 Chapter 14 CDO valuation and cash flow waterfall models 507 Chapter 15 Synthetic conduits and credit derivative funding structures 533 Part III CD-R 559 Chapter 16 Files on the accompanying CD-R 561 Contributing authors 567 Afterword: Econometrics, finance and football 569 Glossary 575 Index 589

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Book SynopsisA solid understanding of how banks operate is crucial to grasp the functioning of modern society. Banks are an intrinsic part of business, finance, and everyday life. Modern banking is regulated by a sophisticated set of laws and regulations that are constantly evolving. Banking Law and Practice from the Hong Kong Institute of Bankers outlines and explains these laws and regulations clearly and in detail. This regulatory framework has a deep impact on banks, bankers, and anyone that deals with them, which is the overwhelming majority of society. This high level of impact makes Banking Law and Practice an important book as well as a necessary and authoritative reference for industry professionals, students, and the public at large. Banking Law and Practice discusses a range of topics that have a direct bearing on the day-to-day operations of banks, from contracts to how to ensure safe and secure lending. It examines the development and current state of banking legislation and reguTable of ContentsPreface ix PART 1 BANK-CUSTOMER RELATIONSHIP AND ACCOUNT OPENING 1 1 Contractual Relationships in Law and Practice 3 Learning Objectives 3 Introduction 4 Definition of ‘Customer’ 4 Nature of the Banker-Customer Relationship 5 Laws and Practice 7 Mandates 9 Power of Attorney 11 Limitation of Actions 14 Appropriation of Payments 15 Set-off 17 Banker’s Lien 20 Banker’s Duty of Secrecy 21 Personal Data and Consumer Credit Data 28 Statement of Account or Passbook 33 Wrongful Dishonour of Cheques 34 Exemption Clauses 36 Summary 37 Key Terms 38 Study Guide 39 Further Reading 39 2 Opening and Conduct of Accounts 41 Learning Objectives 41 Introduction 42 Opening of an Account 42 Conduct of Account 44 Closing of Account 51 Opening and Conduct of Accounts for Various Customers 52 Defi nition of Different Types of Authorities 82 Anti-Money Laundering and Counter-Terrorist Financing 85 Summary 98 Key Terms 99 Study Guide 100 Further Reading 100 PART 2 BANKING OPERATIONS 101 3 Bills of Exchange and Promissory Notes 103 Learning Objectives 103 Introduction 104 Negotiable Instruments 104 Bills of Exchange 107 Promissory Notes 124 Summary 127 Key Terms 128 Study Guide 128 Further Reading 129 4 Other Banking Operations 131 Learning Objectives 131 Introduction 132 Credit Cards 132 Direct Debiting 138 Automated Teller Machines 141 Electronic Funds Transfer at the Point of Sale 143 Investment Advice 144 Safe Custody 146 Other Banking Services 150 Internet and Phone Banking 152 Summary 154 Key Terms 156 Study Guide 156 Further Reading 157 PART 3 LAW RELATING TO SECURITY 159 5 Guarantee 161 Learning Objectives 161 Introduction 162 What is a Guarantee? 162 Undue Infl uence 165 Guarantees by Minors 166 Guarantees by Partnerships 167 Corporate Guarantees 168 Joint and Several Guarantees 168 Liability of Guarantors 170 Guarantor’s Rights as Against the Creditor 172 Guarantor’s Rights as Against the Debtor 173 Rights of Co-Guarantors 174 Duties of the Creditor Bank 175 Discharge of the Guarantor 176 Summary 180 Key Terms 181 Study Guide 182 Further Reading 182 6 Mortgage of Land 183 Learning Objectives 183 Introduction 184 Land in Hong Kong 184 Mortgages 187 Priorities 192 Rights of Mortgagee/Chargee 195 Rights of Mortgagors/Chargors 201 Discharge 205 Summary 205 Key Terms 206 Study Guide 207 Further Reading 207 7 Other Security Interests 209 Learning Objectives 209 Introduction 210 Company Charge 210 Pledge 218 Hypothecation 222 Company Shares 224 Insurance Policies 229 Bankers’ Lien 235 Summary 236 Key Terms 237 Study Guide 237 Further Reading 238 PART 4 INSOLVENCY 239 8 Bankruptcy 241 Learning Objectives 241 Introduction 242 Bankruptcy 242 Bankruptcy Order 244 Discharge From Bankruptcy 248 Voluntary Arrangements 248 Legal Issues for the Banker 250 Summary 254 Key Terms 256 Study Guide 256 Further Reading 256 9 Winding Up 257 Learning Objectives 257 Introduction 258 Winding Up 258 Compulsory Winding Up 259 Voluntary Winding Up 262 Petition for Winding Up 265 The Liquidator 265 Unregistered Companies 271 Assets Available for Distribution 271 Ranking of Claims 274 Antecedent Transactions 276 Legal Issues for the Banker 278 Summary 282 Key Terms 283 Study Guide 283 Further Reading 284 Index 285

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Book SynopsisIt's no secret that stock market performance over recent years has been disappointing, to say the least or abysmal, to be more realistic. And when the markets go down, mutual funds go down with them. So what are Canadian investors to do? Hedge funds are alternative investments that are designed to provide investors with strong returns during both bull and bear markets. More widely available than ever before, the popularity of hedge funds has been growing rapidly in Canada, thanks to regulatory changes and the continued poor performance of more traditional investment vehicles. But with risks and pitfalls of their own, they are often misunderstood by the average investor. Written by two of the industry''s top experts and commentators, this is the first book of its kind a complete guide to the hedge fund industry in Canada now completely revised: Includes complete coverage on: what hedge funds are and how to use them to your advantage; myths and facts about hedgTable of ContentsIntroduction. Chapter 1: The History of Hedge Funds. Chapter 2: The Difference Between Hedge Funds and Mutual Funds. Chapter 3: Why Canadians Need Hedge Funds. Chapter 4: Hedge Fund Styles. Chapter 5: Picking a Hedge Fund That's Right for You. Chapter 6: Buying, Managing, and Selling Your Hedge Fund. 50 Hedge Fund Companies in Canada Today. Appendix I: Glossary of Terms. Appendix II: Resources. List of Hedge Fund Companies. Index.

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Book SynopsisThe credit derivatives market is booming and, for the first time, expanding into the banking sector which previously has had very little exposure to quantitative modeling. This phenomenon has forced a large number of professionals to confront this issue for the first time.Table of ContentsPreface. Acknowledgements. Abbreviations. Notation. 1. Introduction. 2. Credit Derivatives: Overview and Hedge-Based Pricing. 3. Credit Spreads and Bond Price-Based Pricing. 4. Mathematical Background. 5. Advanced Credit Spread Models. 6. Recovery Modelling. 7. Implementation of Intensity-Based Models. 8. Credit Rating Models. 9. Firm Value and Share Price-Based Models. 10. Models for Default Correlation. Bibliography. Index.

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Book SynopsisThere is one constant factor in the chaos of the markets and that constant is human psychology. In the Psychology of Finance readers are shown how the market''s characteristics that arise can be interpreted and learnt from. This revised edition contains new examples and updates to charts. There is also a summary of the characteristics of each phase of the equity market, bear bottom, rise, bull peak, and decline. It includes an appendix covering the history of economic psychology Written in an extremely readable and enjoyable style it shows how psychology can drive movements in the prices of financial assets, breakdown key market phenomena, eg, irrational attitude changes in the individual, and their indicators.Table of ContentsPart I: The Dark Forces of Time and Ignorance. Rational Agents and Real Worlds. A Few Practical Terms. Part II: The Four Terrible Truths about Finance. The First Rule: The Market Is Ahead. The Second Rule: The Market is Irrational. The Third Rule: Chaos Reigns. The Fourth Rule: Charts are Self-fulfilling. Part III: The Psychology of Man. The Beginning of Psychology. The Major Schools Emerge. Part IV: The Behaviour Of Groups. The Alchemists. Psychology Meets Finance. Part V: The Psychology of Market Information. The Fastest Game in Town. Smoke without Fire?. Little and Big Fish. Frames and Attitudes. Part VI: The Psychology of Trending Markets. Entering the Staircase. Harmony and Resonance. Meet Mr Ponzi. Differences between Bull and Bear Markets. Part VII: The Psychology of Ranging Markets. Doubt and Hesitation. When Markets get Overextended. Part VIII: The Psychology of Turning Points. What's Really Going On when a Trend Reverses? Warning Signals for Major Trend reversals. Part IX: The Psychology of Panics. Tracing the Monster's Tracks. Animal Spirits. Part X: Beating the Gun. Exposure and Timing. The Road to Ruin. Appendix I: Timeline of General Psychology. Appendix II: Timeline of Economic Psychology. Appendix III: Timeline of Technical Analysis. Appendix IV: List of Historical Financial Crises. Appendix V: Summary of Possible Psychological Phenomena During Trends, Turning Points and Panics.

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Book SynopsisOffers coverage of how hedge funds work, from risks to rewards. This work discusses - from an investor's perspective - the potential uses, risks, and returns in hedge funds, while offering both the qualitative and quantitative tools investors need to access these types of funds.Trade Review“Balanced, Constructive and instructive, this is an essential read for investors, portfolio managers and financial advisers.” (Financial World, July 2004)"Das neue Buch ist eine Bereicherung, sowohl für den Anfänger als auch für den fortgeschrittenen Kenner der Hedge Fund-Szene, da es einige aktuelle Aspekte mit verarbeitet und von einem sehr profunden Kenner der Szene gut lesbar aufbereitet wurde." Absolutreport, Nr. 8-9/2002, (www.absolut-report.de)Table of ContentsIntroduction Part One Hedge Fund Overview The Basics Revisited. Legal Environment and Structures. Operational and Organizational Structures. Part Two Hedge Fund Strategies Introduction to Strategies. The Tools used by Hedge Funds. Long/Short Strategies. Arbitrage and Relative Value Strategies. Event-Driven Strategies. Directional Strategies. Hedge Fund Indices. Hedge Fund Performance: Beyond Net Asset Values. Part Three Hedge Fund Investing Introduction. Asset Allocation Hedge Fund Selection Funds of Funds: The Quest for Meta-diversification. Capital Guaranteed Products. Advanced Topics: inside the black box Conclusions. Appendix: The Statistics of Hedge Funds. Useful Sources of Information.

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Book SynopsisOne of the few books on the subject, Country Risk Assessment combines the theoretical and practical tools for managing international country risk exposure. - Offers a comprehensive discussion of the specific mechanisms that apply to country risk assessment. - Discusses various techniques associated with global investment strategy.Table of ContentsPreface. Acknowledgments. Foreword by Campbell R. Harvey 1 Introduction. 2 An Overview of Country Risk . 3 The Economic and Financial Foundations of Country Risk Assessment . 4 Country Risk Assessment Methodologies: The Qualitative, Structural Approach to Country Risk. 5 Assessment Methodologies: Ratings. 6 Econometric and Mathematical Methods. 7 Risk Models. 8 International Portfolio Investment Analysis. 9 Financial Crises in Emerging Market Countries: An Historical Perspective. 10 Country Risk and Risk Mitigation Instruments. 11 Country Risk Assessment: A Matter of Information and Intelligence Gathering. Glossary. Index

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Book SynopsisProviding a balanced and practical approach to capital management and budgeting, this book covers the full spectrum of capital investments, from the basics through the latest innovations. It is aimed at managers who are involved in capital investment decisions: setting company capital investment policy; performing project analyses; and drafting recommendations. Those in top management will benefit from discussions of strong and weak points of various methods and concepts. Included in the arsenal of capital investment tools in this book are concepts of proven usefulness, such as the MAPI method, no longer available in other works on the topic of capital budgeting, and other topics not covered elsewhere, such as abandonment analysis.Table of ContentsPreface. Acknowledgments. Introduction: The big picture, environment, terminology, and preview. The objective of capital budgeting. Estimating basic project characteristics. Cost of capital. Traditional methods that ignore time-value of money. Traditional methods that recognize time-value of money: the net present value. Traditional methods that recognize time-value of money: the internal rate of return. Reinvestment rate assumptions for NPV and IRR and conflicting rankings. The MAPI method. The problem of mixed cash flows: I. The problem of mixed cash flows: II. Appendix: The problem of mixed cash flows III—a two-stage method of analysis. Leasing. Appendix. Leveraged leases. Alternative investment measures. Project abandonment analysis. Multiple project capital budgeting. Appendix to multiple project capital budgeting. Utility and risk aversion. Single project analysis under risk. Multiple project selection under risk: computer simulation and other approaches. Multiple project selection under risk: portfolio approaches. The capital asset pricing model. Multiple project selection under risk. Real options. Appendix: Financial mathematics tables and formulas. Bibliography. Index.

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Book SynopsisUsing practical case studies and interviews with leading experts in the field, this book analyses the key elements in value creation. It provides practical guidance to organisations that will allow them to migrate into an economy that demands new business models.Trade Review"…this book aims at a paradigm change in management and names good reasons and arguments for it…" (Controller Magazin, May 2002) "…a comprehensive collection of material and a rich source for ideas around the topic of intangible assets management…" (is-report, September 2002) "…Daums suggestion…which unites the best concepts available in the market is brilliant and typical for times…" (Accounting, August 2002)Table of ContentsList of Interviews. Foreword. Foreward to the German edition. About the Author. Introduction. PART 1. NEW CORPORATE VALUES. Intangible Assets: The Foundation of a New Economy. New Corporate Success Factors. PART 2. THE NEW ENTERPRISE. Openness and Transparency as Success Factors. Value Creation through Structural Capital. PART 3. NEW MANAGEMENT. New Value Drivers Require a New Management Approach. Architecture and Elements of the New Management System. The New Performance Measurement and Accounting System. New Management Processes and Concepts for the New Management System. Implementing the New Management System - New Roles for Managers. PART 4. EPILOGUE. Intangible Assets and the Wealth of Nations. Bibliography. Index.

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Book SynopsisA complete guide to key market features and their impact on each of the main areas of investment This comprehensive guide offers practical advice on how to predict and manage market risk and how to allocate assets for the best performance under different market conditions. The Investor''s Guide to Market Fundamentals covers both the theory and practice of this often-complicated subject, and gives readers a reliable source of market information.Trade Review"…a useful primer in economics for the beginner in financial markets…" (The Business Economist, Vol.34, No.2, 2003)Table of ContentsList of Figures. List of Tables. Preface. Acknowledgements. PART I: ECONOMICS FOR INVESTORS. Why Economic Growth Matters. Business Cycle Fundamentals. Is Inflation Dead? The New Economy: Myth or Reality. Understanding Central Banks. Fiscal Policy. Asset Prices and the Economy. Globalisation and Capital Flows. International Linkages. Emerging Economies. PART II: THE FUNDAMENTALS OF MAJOR ASSET CLASSES. Money Markets. Bond Markets. Stock Markets. Currency Markets. Property Markets. Emerging Markets Investments. Commodity Markets. PART III: SUMMARY AND CONCLUSIONS. Summary: Economic Fundamentals and Market Performance. Economic Fundamentals and the Investment Process. Ten Years of Changing Fundamentals. Useful Websites. Glossary. Index.

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Book SynopsisHarry Schultz is listed in the Guinness Book of Records as the Worlda s Highest paid investment consultant and through his consulting and newsletter has consistently predicted down--turns and successfully advised investors on where to place their money.Trade Review“…a truly brilliant compact tome which I expect will be an acclaimed classic even in 50 years time…” (www.erivativesreview.com, 18 November 2002)Table of Contents1 Introduction 1 Part I The Bear Background 7 2 Overview 9 3 History of Bear Markets 17 Part II Economic Setting for Bear Markets 29 4 Guideposts for Bear Markets 31 5 Globalization, Terrorism, and Foreign Investment 39 Part III Structure of Bear Markets 43 6 Secondary Reactions 45 7 Bear Market Legs 52 Part IV Tools for Measuring Bear Markets 57 8 Tools to Help You Recognize and Survive a Bear Market 59 9 Tools that ‘‘Change Shape’’ in Bear Markets 74 10 Cycles Study: A Useful Market Tool? 78 11 Chart Reading and Interpretation 83 Part V Money-making Tactics 89 12 Preservation of Capital during a Bear Market 91 13 Short Selling 101 98 14 Strategies for Making Money Even If You Guess Wrong 108 15 Rules for Being a Flexible Investor 115 16 Defensive Investments that Allow You to Sleep Nights 119 Part VI The Emotional Aspect 127 17 Human Psychology in the Marketplace 129 18 Contrary Opinion 137 Part VII Predictions and Conclusions 143 19 The Past is Prologue 145 20 Epilogue 155 Glossary of Terms and Tactics for Market Mastery 159 Resources/Recommended books, newsletters, data suppliers, chart services 168 Index 175

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Book SynopsisIn an era of globalization, syndicated lending and consolidation within the banking industry, virtually all industries will have international dealings, and will therefore be exposed to consequential risks. This work provides an understanding of how to calculate, analyse, and manage such risks.Table of ContentsForeword ix About the Author xi 1 The Banking Background 1 1.1 Different types of banks and their risk profile 1 1.1.1 Bank failure and the financial services community 1 1.1.2 What do banks do? How do they earn their money? 3 1.1.3 Different types of banks and their revenue structures 6 1.1.4 Commercial banks 7 1.1.5 Investment banks 10 1.1.6 Risk profile of investment banks 13 1.1.7 Broking is a competitive business 13 1.1.8 Derivatives trading and AAA subsidiaries 13 1.1.9 The regulation of investment banks 14 1.1.10 “Analyst of the year” awards 14 1.2 Primary causes of bank failure 16 1.2.1 Types of failures 17 1.2.2 Causes of losses 18 1.2.3 Warning signals in predicting bank failure 24 1.2.4 Rescuing the bank! 28 1.2.5 Credit rating agencies 30 1.3 Bank failures – the four aces 31 1.3.1 Bank of Credit and Commerce International 31 1.3.2 Continental Illinois 34 1.3.3 Crédit Lyonnais 36 1.3.4 Rumasa 39 1.4 The macroeconomic environment 41 1.4.1 Banking system and industry risks 41 1.4.2 Economic environment 43 1.4.3 Industry competition and its impact on banks 43 1.4.4 Technology 44 2 The Rating Framework 45 2.1 What is a rating? 45 2.2 The development of ratings 46 2.3 Background to rating agencies 46 2.3.1 Inconsistent initial foundations 48 2.3.2 Secretive deliberations 51 2.3.3 Main source of revenues 51 2.3.4 Generating value 53 2.3.5 Growth and the future 54 2.4 The rating analytical framework 56 2.4.1 CAMEL, CAMEL B-COM, and CAMELOT 58 2.4.2 Capital 59 2.4.3 Asset quality 60 2.4.4 Management 62 2.4.5 Earnings 64 2.4.6 Liquidity (liability management) 64 2.5 How the rating agencies analyse bank risk 65 2.5.1 What is a rating? 65 2.5.2 Rating scale comparisons 66 2.5.3 Standard & Poor’s ratings 66 2.5.4 Moody’s ratings 68 2.5.5 Fitch performance and legal ratings 69 3 The Regulatory Framework 73 3.1 Banking system: structure, governing law, and regulations 73 3.1.1 Banking supervision 75 3.2 Core principles for effective banking supervision 78 3.2.1 Core principles for effective banking supervision 78 3.2.2 Basel committee publications No. 30 (September 1997) on banking principles 80 3.3 Risk management 83 3.3.1 Generally accepted risk principles 83 3.3.2 Derivatives and market risk 84 3.3.3 Managing bank limits 86 3.3.4 Generally accepted risk principles risk map 87 3.4 Basle Capital Adequacy and international convergence 88 3.4.1 Background to the Basle Capital Adequacy regime 88 3.4.2 Pressures for change 89 3.4.3 The BIS paper: the response of the central banks 90 3.4.4 Foreign exchange and interest rate related exposure 93 3.4.5 Implementation 95 3.4.6 Impact of the BIS proposals 95 4 The Analytical Framework 97 4.1 Introduction 97 4.1.1 The specific nature of bank financial analysis 97 4.1.2 Sources of information on banks 98 4.1.3 Other sources of information 100 4.2 Financial criteria – the key factors 101 4.2.1 Financial statement analysis 101 4.2.2 Spreadsheet analysis 105 4.3 Understanding the bank’s balance sheet 107 4.3.1 Overview 107 4.3.2 Balance sheet 110 4.3.3 Assets 111 4.3.4 Liabilities 114 4.3.5 Contingent liabilities 117 4.3.6 Income statement 118 4.3.7 Financial analysis of investment banks 121 4.3.8 Risk profile of investment banks 125 5 Bankscope and Comparative Techniques 127 5.1 Bankscope spreadsheet analysis 127 5.2 Bankscope ratios and ratio analysis 130 5.2.1 Lines of the Bankscope global format 130 5.2.2 Financial ratio analysis 131 5.2.3 The Bankscope ratios 131 5.3 Bank peer group analysis 139 5.3.1 Analytical techniques 139 5.4 Problems with intercountry comparisons 141 5.4.1 Local vs international accounting standards 141 5.4.2 Inflation accounting 142 5.4.3 Creative accounting and ratio manipulation 143 6 Country and Political Risk 145 6.1 Country risk 145 6.1.1 Introduction to country risk 145 6.1.2 Definition of country risk 145 6.1.3 Types of countries 146 6.1.4 Country risk assessment 147 6.2 Political risk 148 6.2.1 Introduction to political risk 148 6.2.2 Time dimension 149 6.2.3 Political risk analysis methodologies 149 6.2.4 World Bank list of countries 150 6.3 Typical sovereign ratings process 151 6.3.1 Introduction 151 6.3.2 Political risk 152 6.3.3 Economic risk 154 6.3.4 S&P’s sovereign ratings profiles 160 6.3.5 Behind the sovereign ratings exercise 160 7 The World of E-finance 163 7.1 A quick definition of e-finance 163 7.2 CRM – Customer Relationship Management 164 7.3 STP/CLS 165 7.3.1 STP – Straight Through Processing 165 7.3.2 CLS – Continuous Linked Settlement 166 7.3.3 Establishment of Continuous Linked Settlement services 166 7.4 SWIFT 167 7.4.1 Background 167 7.5 Electronic funds transfer 169 7.6 Online banking 169 7.7 Day trading 169 7.8 Smart cards 170 7.9 Evolution of e-finance 172 7.10 Origin of e-finance and internet commerce 173 7.10.1 Rise Of e-finance and electronic trading 174 8 Conclusion 177 Glossary 179 Suggested Readings 201 Appendix I 203 Appendix II 209 Appendix III 217 Index 223

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Book SynopsisProvides a manual on quantitative financial analysis. Focusing on methods for modelling financial markets in the context of practical financial applications, this book covers data, software and techniques that enables the reader to implement and interpret quantitative methodologies, specifically for trading and investment.Table of ContentsAbout the Contributors. Preface. 1 Applications of Advanced Regression Analysis for Trading and Investment (Christian L. Dunis and Mark Williams). Abstract. 1.1 Introduction. 1.2 Literature review. 1.3 The exchange rate and related financial data. 1.4 Benchmark models: theory and methodology. 1.5 Neural network models: theory and methodology. 1.6 Forecasting accuracy and trading simulation. 1.7 Concluding remarks. 2 Using Cointegration to Hedge and Trade International Equities (A. Neil Burgess). Abstract. 2.1 Introduction. 2.2 Time series modelling and cointegration. 2.3 Implicit hedging of unknown common risk factors. 2.4 Relative value and statistical arbitrage. 2.5 Illustration of cointegration in a controlled simulation. 2.6 Application to international equities. 2.7 Discussion and conclusions. 3 Modelling the Term Structure of Interest Rates: An Application of Gaussian Affine Models to the German Yield Curve (Nuno Cassola and Jorge Barros Luis). Abstract. 3.1 Introduction. 3.2 Background issues on asset pricing. 3.3 Duffie–Kan affine models of the term structure. 3.4 A forward rate test of the expectations theory. 3.5 Identification. 3.6 Econometric methodology and applications. 3.7 Estimation results. 3.8 Conclusions. 4 Forecasting and Trading Currency Volatility: An Application of Recurrent Neural Regression and Model Combination (Christian L. Dunis and Xuehuan Huang). Abstract. 4.1 Introduction. 4.2 The exchange rate and volatility data. 4.3 The GARCH (1,1) benchmark volatility forecasts. 4.4 The neural network volatility forecasts. 4.5 Model combinations and forecasting accuracy. 4.6 Foreign exchange volatility trading models. 4.7 Concluding remarks and further work. 5 Implementing Neural Networks, Classification Trees, and Rule Induction Classification Techniques: An Application to Credit Risk (George T. Albanis). Abstract. 5.1 Introduction. 5.2 Data description. 5.3 Neural networks for classification in Excel. 5.4 Classification tree in Excel. 5.5 See5 classifier. 5.6 Conclusions. 6 Switching Regime Volatility: An Empirical Evaluation (Bruno B. Roche and Michael Rockinger). Abstract. 6.1 Introduction. 6.2 The model. 6.3 Maximum likelihood estimation. 6.4 An application to foreign exchange rates. 6.5 Conclusion. 7 Quantitative Equity Investment Management with Time-Varying Factor Sensitivities (Yves Bentz). Abstract. 7.1 Introduction. 7.2 Factor sensitivities defined. 7.3 OLS to estimate factor sensitivities: a simple, popular but inaccurate method. 7.4 WLS to estimate factor sensitivities: a better but still sub-optimal method. 7.5 The stochastic parameter regression model and the Kalman filter: the best way to estimate factor sensitivities. 7.6 Conclusion. 8 Stochastic Volatility Models: A Survey with Applications to Option Pricing and Value at Risk (Monica Billio and Domenico Sartore). Abstract. 8.1 Introduction. 8.2 Models of changing volatility. 8.3 Stochastic volatility models. 8.4 Estimation. 8.5 Extensions of SV models. 8.6 Multivariate models. 8.7 Empirical applications. 8.8 Concluding remarks. 9 Portfolio Analysis Using Excel (Jason Laws). Abstract. 9.1 Introduction. 9.2 The simple Markovitz model. 9.3 The matrix approach to portfolio risk. 9.4 Matrix algebra in Excel when the number of assets increases. 9.5 Alternative optimisation targets. 9.6 Conclusion. 10 Applied Volatility and Correlation Modelling Using Excel (Frederick Bourgoin). Abstract. 10.1 Introduction. 10.2 The Basics. 10.3 Univariate models. 10.4 Multivariate models. 10.5 Conclusion. 11 Optimal Allocation of Trend-Following Rules: An Application Case of Theoretical Results (Pierre Lequeux). Abstract. 11.1 Introduction. 11.2 Data. 11.3 Moving averages and their statistical properties. 11.4 Trading rule equivalence. 11.5 Expected transactions cost under assumption of random walk. 11.6 Theoretical correlation of linear forecasters. 11.7 Expected volatility of MA. 11.8 Expected return of linear forecasters. 11.9 An applied example. 11.10 Final remarks. References. 12 Portfolio Management and Information from Over-the-Counter Currency Options (Jorge Barros Luis). Abstract. 12.1 Introduction. 12.2 The valuation of currency options spreads. 12.3 RND estimation using option spreads. 12.4 Measures of correlation and option prices. 12.5 Indicators of credibility of an exchange rate band. 12.6 Empirical applications. 12.7 Conclusions. 13 Filling Analysis for Missing Data: An Application to Weather Risk Management (Christian L. Dunis and Vassilios Karalis). Abstract. 13.1 Introduction. 13.2 Weather data and weather derivatives. 13.3 Alternative filling methods for missing data. 13.4 Empirical results. 13.5 Concluding remarks. Index.

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Book SynopsisThis book will explain, from the point of view of the practitioner, the analysis of investment risk - a proper account of adequate risk management strategies - and offer an objective and readable account of the most common investment risk management procedures.Table of Contents1 Introduction to Investment Risk. Dream versus rude awakening. Book structure. 2 The Beginning of Risk. Risk and business. Case study: The shark and its risk. Case study: The ruin of Crédit Lyonnais (CL). Case study: ABB engineering. Investment scams. Banking risk and sharks. Risk management as a discipline. Humans and risk. Case study: High-street retail store losses. Case study: Allied Irish Bank (AIB). The state of the investment game. Risk types. Reputation risk. Case study: Equitable Life. Credit risk. Market risk. Operational risk. Risk and damage. Viable alternatives. 3 Investing under Risk. Human behaviour and investment choice. Portfolio management. Value-at-Risk (VaR). Monte Carlo simulation. Collective use of mathematical tools. Position keeping. Investment managerial control. The treasurer’s role. Trading and risk management. Investment risk experts. Case study: A large UK PLC defined benefits pension fund. Who controls whom. 4 Investing under Attack. Investor disenchantment. Risk-bearers and risk-takers. Professional investor/shareholder. Investment companies/fund managers. Investment banks. Auditors. A look in the risk mirror. Risk-averse. Risk-neutral. Risk-takers. Investor analysis. Types of CEO – birds of a feather. The CEO eagle – The M&A addict. The CEO dodo – Risk-phobic. The CEO ostrich – Risk-ignorant. The CEO owl – Risk-acceptable. The CEO magpie – Risk-seeking. Company structure and risks. Case study: The executive background check. Risk vanities. Pensions mis-selling. Case study: Boo.com. Corporate misgovernance. Accuracy of corporate losses. Classes of instruments and their risk components. Derivatives. Bonds. Equities. Investment as a project. 5 Investing under Investigation. Instinct versus ability. Checking corporate fundamentals. Formulate a business plan. Due diligence. Risk support and methodology. Investor cynicism. Case study: LTCM. 6 Risk Warning Signs. Prevailing risk attitudes. Reputational risk. Case study: Enron. Airborne early warning (AEW). International accounting standards (IAS). Credit ratings. The ratings procedure. Business lines. Law and risk management. Case study: the UK Football League. What the law covers. Completeness of contract. Case study: Merrill Lynch versus Unilever pension fund. Sarbanes–Oxley Act for audit control. Insurance. Risk retention: self-insurance. Case study: Insuring big oil projects. Case study: the Names and Lloyds, London. Sharing, transferring or mitigating risk. Search for risk management. Alternative theories. Causality and managing investment risk. Value-added chain. Risk management to pick up the pieces. Scenario analysis. Case study: Business Continuity, lessons from September 11th. Case study: Guaranteed annuity payments. Stress testing. Bayesian probability. Artificial intelligence (AI) and expert systems. Case study: Anti-money laundering. Risk maps. 7 The Promise of Risk Management Systems. Current state of systems. Risk management methodology – RAMP. Activity A: Analysis and project launch. Activity B: Risk review. Activity C: Risk management. Activity D: Project close down. Financial IT system support. The Basel II Loss Database project. Case study: Algorithmics systems in a bank. Integration and straight-through processing (STP). IT systems project failure. Case study: IT overload. Tying financial system functionality to promise. Risk Prioritisation. Giving the go-ahead. Building risk management systems. Finding the “best” risk management system. The invitation to tender (ITT) process. Business functionality requirements. User’s functional priorities. Business flirting – the user’s system specification. Business flirting – the supplier’s reply. Judging the ITT beauty show. System priorities. Project life cycle. Risk management project plan. A – Our risk strategy. B – Risk review. C – Risk management. D – Project close down. 8 Realistic Risk Management. Intentional damage. Fraud, theft and loss. Fraud perceived as the main criminal threat. 419 – not a number, but a way of life. Operational risk in emerging markets. Parachuting in the experts. Case study: Chase Manhattan in Russia. Unintentional damage. Case study: Split capital investment funds. Rogue staff. Exposure to fraud at the top. Exposure to fraud lower down the rung. Case Study: Deutsche Morgan-Grenfell, 1996. An operational risk perspective. Operational risk protection: the “roof”. Investment project growth. Phase 1: High skill. Phase 2: High performance. Phase 3: Client growth. Phase 4: Asset growth. Case Study: Soros Quantum Fund and Buffett’s Berkshire Hathaway. Phase 5: Skill decline. Investor risk skills. Investment management skills in the market. Hiring star managers and CEOs. Investment managers and governance. Creating a winning fund management team. Building for investment resilience. Moving ahead from the investment herd. Recap on operational risk. 9 The Basel II Banking Regulations. Current banking problems. Basel II – a brief overview. 1 Pillar one: Capital requirements. 2 Pillar two: Supervisory review. 3 Pillar three: Market discipline. Cost-benefits under Basel II. Risk for financial institutions and insurance. The Basel II OpRisk principles. Loss database. Loss database drawbacks. Scenarios for Basel II OpRisk. Next steps: After Basel. 10 Future-proofing against Risk. Moral hazard. Risk detection. Case study: Marconi. Risk countermeasures. Case study: The Yakuza and shareholder meetings. Risk firepower. Case study: Huntingdon Life Sciences (HLS). Insurance: the buck used to stop here. Risk monitoring. Case study: WorldCom. Forensic accounting. Appropriate risk management structure. Case study: BCCI bank. Facts, not figures. New risk focus. 11 Integrated Risk Management. Developments in the finance sector. Organic risk management. Separating reputation from risk management. Case study: Enron. Future for risk management. The case for organic risk management. Case study: Hunting for staff deceit. Unintentional (ostensibly) and legal. Intentional and illegal. The reigning investment ideology. 12 Summary and Conclusions. Summary of risk management. Identify stakeholders and interests. Match risk appetites. Match risk time horizons. Organic due diligence. Value for money. Reputation risk. The corporate governance model. Hitting back. Keep your eyes on the prize. Conclusions. Index.

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Book SynopsisFinancial Risk Taking offers readers a context within which to assess their own strengths and weaknesses as investors. * Explains an apposite and uncomplicated system of skills development in the form of competences and competencies that can be applied anywhere along the continuum from casual investor to full--time day trader.Table of ContentsList of Figures. Foreword. Contrarian Investment Strategies. Acknowledgements. 1. Introduction: Between Scylla and Charybdis. 2. Understanding Trading Competence. 3. A Comprehensive Model of Trading Competence. Part A: The Tactical Model of Trading Competence. Part B: The Strategic Model of Trading Competence. 4. Taming Stress to Become a Better Trader. 5. The Psychology of Perceptual Bias. 6. Emotions, Emotional Intelligence, and the Trader. 7. Martial Arts and Budo Zen – Controlling Fear and Self-Sabotage. 8. Standards and Criteria for Trading Competence. Appendix 1: Reading List. Appendix 2: Websites of Interest. Appendix 3: Courses and Seminars. Bibliography. Index.

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Book SynopsisProvides a comprehensive description of currency overlay, its history, the reason for its emergence, the debates and controversies, the different styles of currency management, and the industry's performance track record. This book also uses diagrams, charts, tables and explanatory boxes to explain the concepts.Table of ContentsList of boxes xv Biography xvii Acknowledgements xix 1 Introduction 1 1.1 Investment background 2 1.1.1 Investor instruments 2 1.1.2 Key investor categories 3 1.1.3 Defined benefit pensions 5 1.1.4 Defined contribution pensions 6 1.1.5 Investors in a currency overlay context 6 2 The Problem 9 2.1 Asset and liability valuations, volatility and solvency 9 2.1.1 Funded pension schemes 9 2.1.2 Asset valuations 9 2.1.3 Liability valuations 11 2.1.4 Liabilities’ discount rate 11 2.1.5 Frs 17 13 2.1.6 Ias 19 13 2.1.7 Summary on assets and liabilities 13 2.2 History of pension fund cross-border portfolio investing 14 2.2.1 US 14 2.2.2 UK 14 2.3 Currency volatility 15 2.4 Corporate parallels in cross-border investing 20 2.4.1 Foreign assets 20 2.4.2 Foreign debt 20 2.4.3 Economic impact of corporate currency exposure 21 3 Currency Hedging 23 3.1 Instruments available 23 3.1.1 Foreign debt 23 3.1.2 Forward contracts 25 3.1.3 Currency swaps 31 3.1.4 Currency futures 34 3.1.5 Currency options 37 3.2 Option pricing 38 3.2.1 First principles 39 3.2.2 Option pricing theory 39 3.3 The Black–Scholes model 40 3.3.1 Market assumptions 40 3.3.2 The model 41 3.3.3 Understanding option pricing 42 3.3.4 The role of assumptions in option pricing 46 3.3.5 Practical implications of assumptions violations 48 3.4 Currency option pricing history 49 3.4.1 Lognormality 49 3.4.2 Monte Carlo models 50 3.4.3 Costs 50 3.4.4 Sensitivity 51 3.5 Interest rates and forward currency rates 51 3.6 Currency Surprise 53 3.6.1 What is currency surprise? 53 3.6.2 Currency surprise calculation 53 3.6.3 Why not spot returns? 54 3.6.4 Geometric linking and ‘adding across’ 57 4 Foreign Exchange Market – History and Structure 61 4.1 A brief history of the foreign exchange market and how instruments developed 61 4.1.1 Bretton Woods 61 4.1.2 Central banks as buffer 61 4.1.3 Ad hoc foreign exchange market development 62 4.1.4 Free markets dominate 63 4.1.5 The euro 64 4.1.6 Instruments 65 4.2 Basic structure 65 4.2.1 Market size 66 4.2.2 Banks – the market-makers 67 4.2.3 Customers 67 4.2.4 Clearing mechanism 69 4.2.5 Turnover excluding ‘clearing’ 70 4.3 Customer types 70 4.3.1 Industrial and commercial companies (ICCs) 70 4.3.2 Oil and commodity dealers and merchants 71 4.3.3 Financial institutions (banks and insurance companies) 71 4.3.4 FX option writers 72 4.3.5 Investment pool traders in FX (hedge funds, proprietary traders) 72 4.3.6 Investment managers and currency overlay managers 73 4.3.7 Central banks 74 4.4 Physical and regulatory issues 75 4.4.1 Exchange controls 75 4.4.2 Taxation 79 4.4.3 Financial regulation 80 5 Theory of Currency Hedging of International Portfolios 83 5.1 Lognormal random walk returns 83 5.1.1 Measurement 83 5.1.2 Returns 84 5.1.3 Volatility 86 5.1.4 Normally distributed period returns 88 5.1.5 A simple test 89 5.1.6 Relevance to currency hedging 89 5.2 The ‘free lunch’ 90 5.2.1 Which way up? 91 5.2.2 Adding ‘moving parts’ 91 5.2.3 Currency exposure is different 93 5.2.4 Correlation of asset classes 94 5.3 Hedging and the efficient frontier 97 5.3.1 Constructing an optimiser including currency 97 5.3.2 Optimiser methodology 98 5.4 Implications of transactions costs 101 5.4.1 Expected portfolio added value from passive hedging 102 6 Passive Currency Overlay 105 6.1 Mechanics 105 6.1.1 Original maturity of forward contracts 105 6.1.2 Frequency of cash flows 106 6.1.3 Currencies to be hedged 106 6.1.4 Benchmark or actual asset weights to be hedged? 108 6.1.5 Denominator of ‘contribution from hedging’ 110 6.1.6 Frequency of asset valuation 110 6.2 Rebalancing 111 6.2.1 Frequency of rebalancing 112 6.2.2 Rebalancing buffer (Y/N? size) 114 6.2.3 Buffer – ‘percentage of what?’ 115 6.2.4 Delay in rebalancing 115 6.2.5 Valuation rates 116 6.3 Cash flow 116 6.4 Costs 117 6.4.1 Direct costs 118 6.4.2 Indirect costs 119 6.4.3 Summary on costs 121 6.5 Postscript on costs – conflict of interest 122 7 Currency Overlay Benchmarks 125 7.1 What is a currency benchmark? 125 7.1.1 Misleading currency attribution 126 7.1.2 Benchmark as portfolio 126 7.1.3 Benchmark mechanics 126 7.2 Investability 127 7.2.1 Forward currency prices 127 7.2.2 WM/Reuters rates 128 7.2.3 Contract rolling 129 7.2.4 Scale of contracts 129 7.2.5 Rebalancing 129 7.2.6 Geometric linking 129 7.3 Design 130 7.3.1 Asset plus currency overlay methodology 131 7.3.2 Special case – monthly benchmark calculation 132 7.3.3 Valuation of unmatured contracts 133 7.3.4 Benchmark hedge ratio 133 7.3.5 Embedded currency plus currency overlay methodology 133 7.3.6 Currency overlay only methodology 134 7.3.7 Other methodologies 134 7.3.8 A currency benchmark with or without asset returns? 135 7.3.9 Pricing/costs 136 7.3.10 Prices, not interest rates 136 7.3.11 Rebalancing 137 7.3.12 Original contract maturity 138 7.3.13 Constant maturity benchmarks 138 7.3.14 Discounting 139 7.3.15 Benchmark hedge ratio – strategic considerations 139 7.3.16 Currency coverage and denominator calculation 140 7.3.17 Underlay 140 7.3.18 Benchmark performance 140 7.3.19 Benchmark cash flows 141 7.4 Current practice 144 7.5 Worked examples 145 7.5.1 Asset plus currency overlay methodology 145 7.5.2 Embedded currency plus currency overlay methodology 147 7.5.3 Currency overlay only 148 7.6 Tracking error 148 7.6.1 Passive hedging 149 7.6.2 Summary on tracking error 155 8 Overlaying Different Asset Classes 157 8.1 Equities 157 8.1.1 Correlation – the historical evidence 157 8.1.2 Correlation evidence 158 8.1.3 Individual currency: equity correlations 159 8.1.4 Stability of correlations 160 8.1.5 Summary on correlation 162 8.1.6 Embedded currency 162 8.1.7 Firm level analysis 162 8.1.8 Country index equity returns 167 8.1.9 International equity correlations 169 8.1.10 Volatility reduction – the historical evidence 170 8.1.11 Effect of hedging on portfolio risk 172 8.1.12 Base-currency-specific graphs 174 8.2 Hedge ratios 177 8.2.1 Current debate 177 8.3 Bonds 182 8.3.1 Correlation 182 8.3.2 Stability of correlations 185 8.3.3 Volatility reduction from hedging bonds – the historical evidence 187 8.3.4 International diversification 187 8.4 Property 191 8.5 Other classes 191 9 Is the Currency Market Efficient? 193 9.1 Types of inefficiency 193 9.2 Making the case for currency market inefficiency 194 9.2.1 Cyclical behaviour 194 9.2.2 Lack of statistical arbitrage 194 9.3 Empirical evidence for medium-term trends 195 9.4 Forward rate bias – another inefficiency 198 9.4.1 What is the evidence for the FRB? 199 9.4.2 Risk premium 199 9.4.3 Monetary policy and inflation 201 9.4.4 Nominal rate illusion 202 9.4.5 Other inefficiencies 202 9.5 A successful universe? 202 9.5.1 An example of different perspectives in the FX market 203 9.6 Summary on evidence for inefficiency 203 9.6.1 Weak form efficiency 203 9.6.2 Semi-strong form efficiency 204 9.6.3 Strong form efficiency 204 9.6.4 Transactional efficiency 204 10 Active Currency Overlay – Management Styles 205 10.1 The problem 205 10.2 Modelling and forecasting 206 10.2.1 Modelling – Occam’s razor 206 10.2.2 Can models work? 207 10.2.3 What about active management without models? 209 10.2.4 Dealing and practical execution 210 10.2.5 Timeliness of inputs 210 10.2.6 Judgement and modelling 211 10.2.7 Deal execution 212 10.3 Active management styles 212 10.3.1 Fundamental 213 10.3.2 Technical 219 10.3.3 Option-based 229 10.3.4 Dynamic 234 11 Active Currency Overlay – Evidence of Performance 239 11.1 Surveys 239 11.1.1 Currency overlay performance surveys 239 11.1.2 Performance summary 240 11.2 Who loses? 240 12 Implementing Currency Overlay 243 12.1 Summary check-list 243 12.1.1 What mandate type? 243 12.1.2 For risk-reducing overlay – benchmark hedge ratio 244 12.1.3 Investment guidelines – active 245 12.1.4 Investment guidelines – passive 246 12.1.5 Investment guidelines – alpha 246 12.1.6 Bank FX lines 247 12.1.7 Bank contract confirmation 248 12.1.8 Investment management agreement 248 12.1.9 Reporting requirements 248 12.1.10 Periodic cash and contract reconciliation 249 12.1.11 Bank contract settlement procedures 249 12.1.12 Benchmark calculation 249 12.1.13 Performance measurement 250 12.1.14 Summary check-list 250 12.2 Practical questions and answers 251 13 Looking Ahead 253 13.1 Development of active management styles 253 13.1.1 Top-down/bottom-up 253 13.1.2 Growth/value 254 13.1.3 Contrarian/momentum 254 13.1.4 Ethical 254 13.1.5 Hedge fund styles 255 13.1.6 Summary on styles 255 13.2 Natural selection of overlay managers 256 13.2.1 Conflict of interest 257 13.3 Extending the range of hedging instruments 258 13.4 Will inefficiencies grow or shrink? 258 13.4.1 Can outperformance by currency overlay managers continue? 259 References/Useful Reading 261 Appendices 263 Appendix1–Boundary conditions for forward arbitrage 263 Appendix2–Lognormal returns 267 Appendix3–AIMR R○ report 277 Appendix4–Sample investment guidelines 285 Index 289

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Book SynopsisThe repeated failure of current external reporting mechanisms either to predict the collapse of various companies or to curb corrupt practices has kept the subject of external reporting to the fore. This book contains a selection of contributions from leading experts in the field of external reporting.Trade Review"…this is a timely and useful book…" (Professional Investor, May 2003)Table of ContentsAbout the Editors. List of Abbreviations. Introduction (W. Verhoog). 1. Is fair value fair: Expert opinions on financial reporting from an international perspective: brief impressions (W. Verhoog). Part I The future of international accounting. The model of Black and Scholes is like Newtonian physics before Einstein was born (R. Elliott). Current US accounting issues (N. Strauss). Part II Regulations and regulators. We have to produce one set of unified high-quality global standards (D. Tweedie). EFRAG: a new force to be reckoned with in the reporting field (J. Van Helleman). Not partial, but full application of IAS (L. van der Tas). IAS and the European Union (K. van Hulle). IAS and legislation (J. Klaassen). Shifting towards an Anglo-Saxon perspective on rules (E. Eeftink). Uniform rules are important, but they must not block the view (J. den Hoed). Part III Supervision and compliance. Towards a new supervisory landscape (P. Koster). The Enterprise and Companies Court as supervisory body (J. Willems), &l t;p> Globalisation is OK, as long as it takes account of Dutch culture (M. van Hoepen). Enforcement of IAS is crucial for the realisation of a global standard for financial reporting (R. Vergoossen). Part IV IAS and the users of financial statements. Unambiguous rules, timely reports and close supervision (P. de Vries). The supervisory director: striking the right balance (P. van den Hoek). Insurers are lagging behind (L. Traas). Double Dutch in financial reporting: highly flexible = extremely judgemental? (H. Langendijk). The auditor is gratefully back on his pedestal (P. Lakeman). Part V Fair Value Accounting. The irrepressible advance of Fair Value Accounting (M. Hoogendoorn). From profit smoothing to a true and fair presentation of profits at insurance companies and pension funds (A. Oosenbrug). Introduction of Fair Value Accounting: little if any haste (K. Storm). Fair Value Accounting will result in less transparency and more volatility in banks' financial reporting (B. Bruggink). Financial statements are a result of policy and not a factor informing policy (J. Groeneveld). Financial reporting and the search for truth (D. Swagerman). Warning signals about the application of fair value for financial instruments (T. O'Malley and P. Hofsté). Part VI Capita selecta: external financial reporting and law. IAS: right or wrong? (H. Beckman). Part VII External financial reporting and new-economy companies. The valuation of new-economy companies (A. de Bos). Part VIII International financial reporting by governments. IPSAS and financial reporting by the Dutch government (A. Bac). Part IX The relationship between management accounting and financial accounting. Interaction between internal and external reporting (E. Vosselman). Part X Business combination accounting. A creative approach to mergers and acquisitions (J. Blommaert). Epilogue: toward a single global reporting system. Index.

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Book SynopsisConventional valuation techniques take little account of the unexpected outcomes and uncertainties of real life. Real options are one method of tackling these problems in order to give a realistic view in practice rather than simply in the theoretical world. Tom Copeland in his contribution considers the probability that real options will in the future become the standard method of valuation and of evaluating the financial viability of ventures. This book follows past, current and potential future valuation techniques and discusses current trends in this area in the light of the ever-increasing desire to assess and manage risk and uncertainty.Table of ContentsPreface. About the editors. 1. Introduction - strategic valuation: the relationship betweeen strategy, valuation techniques and options (L. Keuleneer and W. Verhoog). Relationship between value-based management and valuation techniques. Option theory in the determination of value. Conclusion. 2. Valuation of companies: discounted cash flow, adjusted present value, decision-tree analysis and real options (W. De Maeseneire and L. Keuleneer). Introduction. Discounted cash flow method. Adusted present value method. Decision-tree analysis (DTA) and real options (RO). Summary and Conclusions. References. 3. Valuation in practice (T. Copeland). Introduction. Discounted cash flow valuation. Expectations-based management. Real options. 4. Value-based management: control processes to create value through integration (G. Scheipers, et al.). Introduciton. Value-based management. Value-based performance metrics. Value-based management practice. Conclusion. References. Index.

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Book SynopsisMarket players put their jobs on the line with every position they take. Any fixed income investor in the circumstance of being granted one wish would probably want to know what interest rates are going to do in the future. Economists and others have constructed models of interest rate behaviour, but no model works in all circumstances.Table of ContentsAcknowledgments. Biography. Introduction. PART I: BASIC TOOLS FOR ESTABLISHING A FIXED INCOME STRATEGY. 1. Fixed Income Basics. 2. Fixed Income Securities: Beyond the Basics. 3. Economic Fundamentals. PART II: ENHANCED TOOLS FOR ESTABLISHING A VIEW ON INTEREST RATES. 4. Government Policy: The Interface between Economics and Politics. 5. Human Factors. 6. Technical Analysis: Applied Social Psychology. 7. Other Techniques for Short-Term Analysis. 8. An Integrated Approach to Bond Strategy. PART III: IMPLEMENTING YOUR VIEW. 9. Fixed Income Instruments, Investors and Portfolio Management Styles. 10. Fixed Income Trading. 11. Odds and Ends. 12. Survival Principles for the Financial Battlefield. Bibliography. Index.

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Book SynopsisCompanies today are undergoing constant structural change as the result of new business models, mergers, acquisitions, and de--mergers. This book explains why the CFO is in a unique position to integrate business systems and shape the corporation of the future.Table of Contents1 From Complexity to Simplicity 1 What Issues are Today’s CFOs Grappling With? 6 Best Practices in Finance: What’s Next? 12 The New Finance Value Proposition 16 Integration: What it Means for You as CFO 20 CFO Checklist 25 2 Leveraging your ERP Investment 27 What does Integration Mean for the CFO? 32 Unravelling System Spaghetti 36 Beyond ERP 42 Reducing Complexity 46 A Vision for the Post ERP Era 49 Making Integration Work for You 57 CFO Checklist 60 3 Streamlining the Financial Supply Chain 63 What is the Financial Supply Chain? 66 Leveraging the Benefits 66 In-house Cash and Banking 73 Order-to-cash/Electronic Bill Presentment and Payment 80 Purchase-to-pay 90 Simplifying Billing and Payment: Bill Consolidation 91 e-Financing and e-Settlement: A Promising New Tool 93 The Future: Integration and Collaboration 96 CFO Checklist 100 4 Moving from “Shared” to “Managed” Services 103 Why Move to Shared Services? 106 Shared Services Today 111 Physical versus Virtual SSCs: The Lights Are Still On! 113 To Outsource – or Not to Outsource? 115 Evolving Technology: What’s New, Faster, Better 122 Applications Management and Managed Services 124 Evolving Exchanges: Huge Promise and Tough Reality 130 The Potential for Web Services 137 Making it Happen 144 CFO Checklist 150 5 Connecting Strategy with Operations 153 Introducing Strategic Enterprise Management (SEM) 157 Tracking Corporate Performance 160 Integrated Risk Management 166 Blow Up the Budget! 171 Operational Planning and Simulation 177 Business Consolidation and Integration 179 Implementing Integrated SEM 185 CFO Checklist 194 6 Analytics: Converting Data into Action 197 Broader Bottom-line Demands 202 Integrated Analytics: Transforming Data into Decisions 205 Increasing Customer Value through Analytics 207 Bringing Analytics to Supply Chain Management 214 Analytics: Transforming the Finance Function 220 Enriching Product Life Cycle Management (PLM) 227 Improving Human Resource (HR) Analytics 232 Getting Started: Analytics Critical Success Factors 235 CFO Checklist 241 7 Collaboration via the CFO Portal 243 Doubling Productivity 246 Choosing the Right Portal 249 Integration Outweighs Best-of-breed Technology 254 The Personalized Desktop 255 Why should the CFO Drive Portals? 258 A Journey, not a Destination 265 Growing your Finance Community 272 CFO Checklist 277 8 Managing Intangibles 279 Intangible Assets: The New Value Drivers 282 The Problems with Traditional Accounting 283 A New Approach to Performance Management 287 The Enterprise Control Panel 293 Harnessing Innovation and Customer Relationships 295 Value Creation through Value Networks 299 New Processes, New Skills, New Systems 304 Communicating Value Internally and Externally 305 CFO Checklist 313 9 Integrating for Corporate Integrity 315 Global GAAP and Accountability for Value 319 Rebuilding Public Trust 322 CFO as Independent Business Partner 326 The Corporate Reporting Supply Chain 327 Closing the Information Gap 331 Timely and Accurate Financial Reporting 333 Integrating Processes, People, and Technology 337 CFO Checklist 347 Epilogue 349 Biographies 353 Notes 359 Index 363

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Book SynopsisThe capitalist model was developed in the 19th century and recent events have shown the difficulties of adapting this to the demands of the 21st century, in which human and social capital are of far greater importance than physical capital.Trade Review"... cleverly links globalisation and Anglo-American capitalism... if you want to understand what business is going through, it is an excellent place to start." (Management Today, March 2003) 'Plender, a respected Financial Times columnist and former chaiman of the corporate governance consultancy PIRC, analyses the crisis cogently both on macro and micro levels' (Director, April 2003) "…His insightful and wide-ranging book is a must for anyone who wants to understand how global finance shapes the world…" (New Statesman, 21 April 2003) "…Going off the Rails looks at the myriad ways in which those trusted to look after shareholders’ money have let them down…" (Financial Times, 5 May 2003) “…An intelligent book…”(En, May/June 2003)Table of ContentsAbout the author vii Preface ix Part 1 IMPATIENT CAPITAL 1 1 The turn of the global tide 3 2 The Third World ghetto 25 3 Dr Pangloss comes to Wall Street 53 4 Europe pulls up a drawbridge 81 Part 2 DOUBLE STANDARDS 107 5 Uncreative destruction 109 6 The just-in-time CEO 137 7 Enron, alas 161 Part 3 THE LIMITS OF CONVERGENCE 183 8 Apocalypse later 185 9 The semi-detached samurai 201 Part 4 BEYOND SHAREHOLDER VALUE 217 10 The legitimacy crisis 219 11 Putting the world to rights 243 Index 275

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Book SynopsisWealth management is one of the areas in which banks and other personal financial services players are investing heavily. But the market is changing fast. Going forward, players therefore need to adapt their strategies to the new realities: what worked in the past will not, for the most part, be appropriate in the future.Table of ContentsPreface. Acknowledgements. 1. Global Market Overview. 1.1 The wealth management market. 1.2 Key drivers. 1.3 Industry economics. 1.4 Competitive landscape. 2. Industry Challenges: New and Old. 2.1 Clients. 2.2 Products, pricing and channels. 2.3 Competitors and business models. 2.4 External environment. 3. Clients. 3.1 Key characteristics. 3.2 Client segmentation. 3.3 Client value management. 4. New Products and Pricing. 4.1 New products and services. 4.2 Product sourcing and management. 4.3 Pricing. 5. Distribution Channels. 5.1 Relationship managers. 5.2 Other traditional channels. 5.3 New and emerging channels. 5.4 Multichannel management. 6. Players. 6.1 Types of players. 6.2 Business system upheaval. 6.3 Consolidation. 7. Operational Excellence. 7.1 Smart operational sourcing. 7.2 Lean operations. 7.3 Technology transformation. 7.4 Value-added support services. 7.5 Instilling operational excellence. 8. Organisational Design. 8.1 Organisational structure. 8.2 Business unit interfaces. 8.3 International dimension. 9. Regulatory and Tax Issues. 9.1 Money laundering vulnerability. 9.2 Regulatory initiatives. 9.3 Tax initiatives. 10. The Future. 10.1 Introduction. 10.2 Sources of new profitable growth. 10.3 Future industry structure. 10.4 Critical success factors. 10.5 Conclusions. Appendices. Appendix 1: Country wealth market analyses. Appendix 2: FATF 40 recommendations. Appendix 3: FATF special recommendations on terrorist financing. Appendix 4: The Wolfsberg anti-money-laundering principles. Glossary of Terms. Bibliography. Index.

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Book SynopsisVolatility forecasting is an important topic in the finance industry and many areas of finance research. There are many books written on financial market modelling, but few on volatility forecasting and the practical use of these models.Table of ContentsForeword by Clive Granger xiii Preface xv 1 Volatility Definition and Estimation 1 1.1 What is volatility? 1 1.2 Financial market stylized facts 3 1.3 Volatility estimation 10 1.3.1 Using squared return as a proxy for daily volatility 11 1.3.2 Using the high–low measure to proxy volatility 12 1.3.3 Realized volatility, quadratic variation and jumps 14 1.3.4 Scaling and actual volatility 16 1.4 The treatment of large numbers 17 2 Volatility Forecast Evaluation 21 2.1 The form of Xt 21 2.2 Error statistics and the form of εt 23 2.3 Comparing forecast errors of different models 24 2.3.1 Diebold and Mariano’s asymptotic test 26 2.3.2 Diebold and Mariano’s sign test 27 2.3.3 Diebold and Mariano’sWilcoxon sign-rank test 27 2.3.4 Serially correlated loss differentials 28 2.4 Regression-based forecast efficiency and orthogonality test 28 2.5 Other issues in forecast evaluation 30 3 Historical Volatility Models 31 3.1 Modelling issues 31 3.2 Types of historical volatility models 32 3.2.1 Single-state historical volatility models 32 3.2.2 Regime switching and transition exponential smoothing 34 3.3 Forecasting performance 35 4 Arch 37 4.1 Engle (1982) 37 4.2 Generalized ARCH 38 4.3 Integrated GARCH 39 4.4 Exponential GARCH 41 4.5 Other forms of nonlinearity 41 4.6 Forecasting performance 43 5 Linear and Nonlinear Long Memory Models 45 5.1 What is long memory in volatility? 45 5.2 Evidence and impact of volatility long memory 46 5.3 Fractionally integrated model 50 5.3.1 FIGARCH 51 5.3.2 FIEGARCH 52 5.3.3 The positive drift in fractional integrated series 52 5.3.4 Forecasting performance 53 5.4 Competing models for volatility long memory 54 5.4.1 Breaks 54 5.4.2 Components model 55 5.4.3 Regime-switching model 57 5.4.4 Forecasting performance 58 6 Stochastic Volatility 59 6.1 The volatility innovation 59 6.2 The MCMC approach 60 6.2.1 The volatility vector H 61 6.2.2 The parameter w 62 6.3 Forecasting performance 63 7 Multivariate Volatility Models 65 7.1 Asymmetric dynamic covariance model 65 7.2 A bivariate example 67 7.3 Applications 68 8 Black–Scholes 71 8.1 The Black–Scholes formula 71 8.1.1 The Black–Scholes assumptions 72 8.1.2 Black–Scholes implied volatility 73 8.1.3 Black–Scholes implied volatility smile 74 8.1.4 Explanations for the ‘smile’ 75 8.2 Black–Scholes and no-arbitrage pricing 77 8.2.1 The stock price dynamics 77 8.2.2 The Black–Scholes partial differential equation 77 8.2.3 Solving the partial differential equation 79 8.3 Binomial method 80 8.3.1 Matching volatility with u and d 83 8.3.2 A two-step binomial tree and American-style options 85 8.4 Testing option pricing model in practice 86 8.5 Dividend and early exercise premium 88 8.5.1 Known and finite dividends 88 8.5.2 Dividend yield method 88 8.5.3 Barone-Adesi and Whaley quadratic approximation 89 8.6 Measurement errors and bias 90 8.6.1 Investor risk preference 91 8.7 Appendix: Implementing Barone-Adesi and Whaley’s efficient algorithm 92 9 Option Pricing with Stochastic Volatility 97 9.1 The Heston stochastic volatility option pricing model 98 9.2 Heston price and Black–Scholes implied 99 9.3 Model assessment 102 9.3.1 Zero correlation 103 9.3.2 Nonzero correlation 103 9.4 Volatility forecast using the Heston model 105 9.5 Appendix: The market price of volatility risk 107 9.5.1 Ito’s lemma for two stochastic variables 107 9.5.2 The case of stochastic volatility 107 9.5.3 Constructing the risk-free strategy 108 9.5.4 Correlated processes 110 9.5.5 The market price of risk 111 10 Option Forecasting Power 115 10.1 Using option implied standard deviation to forecast volatility 115 10.2 At-the-money or weighted implied? 116 10.3 Implied biasedness 117 10.4 Volatility risk premium 119 11 Volatility Forecasting Records 121 11.1 Which volatility forecasting model? 121 11.2 Getting the right conditional variance and forecast with the ‘wrong’ models 123 11.3 Predictability across different assets 124 11.3.1 Individual stocks 124 11.3.2 Stock market index 125 11.3.3 Exchange rate 126 11.3.4 Other assets 127 12 Volatility Models in Risk Management 129 12.1 Basel Committee and Basel Accords I & II 129 12.2 VaR and backtest 131 12.2.1 VaR 131 12.2.2 Backtest 132 12.2.3 The three-zone approach to backtest evaluation 133 12.3 Extreme value theory and VaR estimation 135 12.3.1 The model 136 12.3.2 10-day VaR 137 12.3.3 Multivariate analysis 138 12.4 Evaluation of VaR models 139 13 VIX and Recent Changes in VIX 143 13.1 New definition for VIX 143 13.2 What is the VXO? 144 13.3 Reason for the change 146 14 Where Next? 147 Appendix 149 References 201 Index 215

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Book SynopsisOffers a practical approach to ART - an alternative method by which companies take on various types of risk. This book shows readers what ART is, how it can be used to mitigate risk, and how certain instruments/structures associated with ART should be implemented. It also explains readers what works and what doesn't when using this technique.Table of ContentsAcknowledgements ix Biography xi PART I: RISK AND THE ART MARKET 1 1 Overview of Risk Management 3 1.1 Risk and return 3 1.2 Active risk management 5 1.2.1 Risk management processes 6 1.2.2 Risk management techniques 7 1.2.3 General risk management considerations 10 1.3 Risk concepts 12 1.3.1 Expected value and variance 12 1.3.2 Risk aversion 14 1.3.3 Risk transfer and the insurance mechanism 16 1.3.4 Diversification and risk pooling 17 1.3.5 Hedging 20 1.3.6 Moral hazard, adverse selection and basis risk 21 1.3.7 Non-insurance transfers 22 1.4 Outline of the book 22 2 Risk Management Drivers: Theoretical Motivations, Benefits, and Costs 25 2.1 Maximizing enterprise value 25 2.2 The decision framework 29 2.2.1 Replacement and abandonment 31 2.2.2 Costs and benefits of loss control 31 2.2.3 Costs and benefits of loss financing 32 2.2.4 Costs and benefits of risk reduction 35 2.3 Coping with market cycles 35 2.3.1 Insurance pricing 35 2.3.2 Hard versus soft markets 37 2.4 Accessing new risk capacity 42 2.5 Diversifying the credit risk of intermediaries 43 2.6 Managing enterprise risks intelligently 44 2.7 Reducing taxes 45 2.8 Overcoming regulatory barriers 46 2.9 Capitalizing on deregulation 47 3 The ART Market and its Participants 49 3.1 A definition of ART 49 3.2 Origins and background of ART 51 3.3 Market participants 52 3.3.1 Insurers and reinsurers 53 3.3.2 Investment, commercial, and universal banks 55 3.3.3 Corporate end-users 56 3.3.4 Investors/capital providers 57 3.3.5 Insurance agents and brokers 57 3.4 Product and market convergence 58 PART II: INSURANCE AND REINSURANCE 61 4 Primary Insurance/Reinsurance Contracts 63 4.1 Insurance concepts 63 4.2 Insurance and loss financing 64 4.3 Primary insurance contracts 65 4.3.1 Maximum risk transfer contracts 65 4.3.2 Minimal risk transfer contracts 66 4.3.3 Layered insurance coverage 76 4.4 Reinsurance and retrocession contracts 78 4.4.1 Facultative and treaty reinsurance 81 4.4.2 Quota share, surplus share, excess of loss, and reinsurance pools 81 4.4.3 Finite reinsurance 86 5 Captives 89 5.1 Using captives to retain risks 89 5.1.1 Background and function 89 5.1.2 Benefits and costs 91 5.2 Forms of captives 94 5.2.1 Pure captives 94 5.2.2 Sister captives 95 5.2.3 Group captives 95 5.2.4 Rent-a-captives and protected cell companies 96 5.2.5 Risk retention groups 99 5.3 Tax consequences 100 6 Multi-risk Products 103 6.1 Multiple peril products 103 6.2 Multiple trigger products 106 PART III: CAPITAL MARKETS 113 7 Capital Markets Issues and Securitization 115 7.1 Overview of securitization 115 7.2 Insurance-linked securities 116 7.2.1 Overview 116 7.2.2 Costs and benefits 118 7.3 Structural features 119 7.3.1 Issuing vehicles 119 7.3.2 Triggers 121 7.3.3 Tranches 123 7.4 Catastrophe bonds 124 7.4.1 Hurricane 124 7.4.2 Earthquake 127 7.4.3 Windstorm 129 7.4.4 Multiple cat peril ILS and peril by tranche ILS 129 7.4.5 Bond/derivative variations 130 7.5 Other insurance-linked securities 131 8 Contingent Capital Structures 135 8.1 Creating post-loss financing products 135 8.2 Contingent debt 139 8.2.1 Committed capital facilities 139 8.2.2 Contingent surplus notes 140 8.2.3 Contingency loans 141 8.2.4 Financial guarantees 142 8.3 Contingent equity 142 8.3.1 Loss equity puts 143 8.3.2 Put protected equity 146 9 Insurance Derivatives 149 9.1 Derivatives and ART 149 9.2 General characteristics of derivatives 150 9.3 Exchange-traded insurance derivatives 156 9.3.1 Exchange-traded catastrophe derivatives 156 9.3.2 Exchange-traded temperature derivatives 157 9.4 OTC insurance derivatives 162 9.4.1 Catastrophe reinsurance swaps 162 9.4.2 Pure catastrophe swaps 164 9.4.3 Temperature derivatives 164 9.4.4 Other weather derivatives 166 9.4.5 Credit derivatives 167 9.5 Bermuda transformers and capital markets subsidiaries 168 PART IV: ART OF THE FUTURE 171 10 Enterprise Risk Management 173 10.1 Combining risks 173 10.1.1 The enterprise risk management concept 173 10.1.2 Costs and benefits 177 10.2 Developing an enterprise risk management program 179 10.2.1 Strategic and governance considerations 180 10.2.2 Program blueprint 182 10.2.3 Program costs 186 10.3 End-user demand 188 11 Prospects for Growth 193 11.1 Drivers of growth 193 11.2 Barriers to growth 194 11.3 Market segments 196 11.3.1 Finite structures 196 11.3.2 Captives 197 11.3.3 Multi-risk products 197 11.3.4 Capital markets issues 198 11.3.5 Contingent capital 198 11.3.6 Insurance derivatives 199 11.3.7 Enterprise risk management 199 11.4 End-user profiles 201 11.5 Future convergence 202 Glossary 205 Selected References 221 Index 223

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Book SynopsisStates that asset management is central to the development of financial industry throughout the world. This book covers conceptual developments of portfolio theory. It covers the importance of innovations with regard to the fundamental portfolio management questions.Table of ContentsAcknowledgements. Biographies. Introduction. 1. Presentation of the Portfolio Management Environment. 1.1 The different categories of assets. 1.2 Definition of portfolio management. 1.3 Organisation of portfolio management and description of the investment management process. 1.4 Performance analysis and market efficiency. 1.5 Performance analysis and the AIMR standards. 1.6 International investment: additional elements to be taken into account. 1.7 Conclusion. 2. The Basic Performance Analysis Concepts. 2.1 Return calculation. 2.2 Calculating relative return. 2.3 Definition of risk. 2.4 Estimation of parameters. 2.5 Conclusion. 3. The Basic Elements of Modern Portfolio Theory. 3.1 Principles. 3.2 The Markowitz model. 3.3 Efficient frontier calculation algorithm. 3.4 Simplified portfolio modelling methods. 3.5 Conclusion . 4. The Capital Asset Pricing Model and its Application to Performance Measurement. 4.1 The CAPM. 4.2 Applying the CAPM to performance measurement: single-index performance measurement indicators. 4.3 Evaluating the management strategy with the help of models derived from the CAPM: timing analysis. 4.4 Measuring the performance of internationally diversified portfolios: extensions to the CAPM. 4.5 The limitations of the CAPM. 5. Developments in the Field of Performance Measurement. 5.1 Heteroskedastic models. 5.2 Performance measurement method using a conditional beta. 5.3 Performance analysis methods that are not dependent on the market model . 5.4 Conclusion. 6. Multi-factor Models and their Application to Performance Measurement. 6.1 Presentation of the multi-factor models. 6.2 Choosing the factors and estimating the model parameters. 6.3 Extending the models to the international arena. 6.4 Applying multi-factor models. 6.5 Summary and conclusion. 7. Evaluating the Investment Management Process and Decomposing Performance. 7.1 The steps in constructing a portfolio. 7.2 Performance decomposition and analysis. 8. Fixed Income Security Investment. 8.1 Modelling yield curves: the term structure of interest rates. 8.2 Managing bond portfolio. 8.3 Performance analysis for fixed income security investment. Conclusion. Index.

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Book SynopsisThere was a great momentum in the research into measures of financial risk. After many years of ad hoc and non consistent measures, the problem is finally well formulated and some useful and very user friendly solutions have been proposed.Trade Review“…excellent..provides detailed and up-to-date reference material…written by someone at the top of his field” (Accounting Technician, Sep 2004)Table of ContentsAbout the Contributors. 1 On the (Non)Acceptance of Innovations (Giorgio Szegö). 1.1 Introduction. 1.2 The path towards acceptance of previous innovations. 1.3 How to answer. 1.4 Conclusions. References. PART I: RISK MEASURES AND REGULATION. 2 The Emperor has no Clothes: Limits to Risk Modelling (Jón Daníelsson). 2.1 Introduction. 2.2 Risk modelling and endogenous response. 2.3 Empirical properties of risk models. 2.3.1 Background. 2.3.2 Robustness of risk forecasts. 2.3.3 Risk volatility. 2.3.4 Model estimation horizon. 2.3.5 Holding periods and loss horizons. 2.3.6 Non-linear dependence. 2.4 The concept of (regulatory) risk. 2.4.1 Volatility. 2.4.2 Value-at-risk. 2.4.3 Coherent risk measures. 2.4.4 Moral hazard – massaging VaR numbers. 2.4.5 The regulatory 99% risk level. 2.5 Implications for regulatory design. 2.6 Conclusion. Acknowledgements. Appendix A: Empirical study. References. 3 Upgrading Value-at-Risk from Diagnostic Metric to Decision Variable: A Wise Thing to Do? (Henk Grootveld and Winfried G. Hallerbach). 3.1 Introduction. 3.2 Preliminaries. 3.2.1 VaR and downside risk. 3.2.2 Downside risk portfolio selection. 3.2.3 Incomplete risk meaure. 3.2.4 Computational issues. 3.3 The mean-value-at-risk portfolio selection model. 3.3.1 Deriving the mean-VaR portfolio selection model. 3.3.2 Distinctive properties of the mean-VaR portfolio selection model. 3.3.3 Solving the mean-VaR portfolio selection problem. 3.4 The mean-value-at-risk portfolio selection model in practice. 3.4.1 Data. 3.4.2 Methodology. 3.4.3 Results. 3.5 Conclusions. Acknowledgements. References. 4 Concave Risk Measures in International Capital Regulation (Imre Kondor, András Szepessy and Tünde Ujvárosi). 4.1 Introduction. 4.2 Risk measures implied by the trading book regulation. 4.2.1 Specific risk of bonds. 4.2.2 Foreign exchange. 4.2.3 Equity risk. 4.2.4 The general risk of bonds. 4.3 Conclusion. Acknowledgements. References. 5 Value-at-Risk, Expected Shortfall and Marginal Risk Contribution (Hans Rau-Bredow). 5.1 Introduction. 5.2 Value-at-risk as a problematic risk measure. 5.3 Derivatives of value-at-risk and expected shortfall. 5.3.1 Preliminary remarks. 5.3.2 First and second derivative of value-at-risk. 5.3.3 First and second derivative of expected shortfall. 5.4 Outlook. Appendix. References. 6 Risk Measures for Asset Allocation Models (Rosella Giacometti and Sergio Ortobelli Lozza). 6.1 Introduction. 6.2 Portfolio risk measures. 6.2.1 Safety risk measures. 6.2.2 Dispersion measures. 6.3 Portfolio choice comparison based on historical data. 6.4 Portfolio choice comparison based on simulated returns. 6.4.1 Portfolio choice comparison with jointly Gaussian returns. 6.4.2 Portfolio choice comparison with jointly stable non-Gaussian returns. 6.5 Conclusions. Acknowledgements. References. 7 Regulation and Incentives for Risk Management in Incomplete Markets (J´on Daníelsson, Bjørn N. Jorgensen and Casper G. de Vries). 7.1 Introduction. 7.1.1 Complete and incomplete markets. 7.2 Moral hazard regarding project choice. 7.2.1 Deposit insurance and moral hazard. 7.2.2 Threat of an alternative project choice. 7.3 Moral hazard regarding risk management. 7.3.1 The basic principal–agent model. 7.3.2 Supervision. 7.4 Risk monitoring and risk management. 7.4.1 Coarser risk monitoring without regulation. 7.4.2 Indirect risk monitoring with regulation. 7.4.3 Finer risk monitoring: no regulation. 7.4.4 Direct risk monitoring with regulation. 7.4.5 Evaluation. 7.5 Conclusion. References. 8 Granularity Adjustment in Portfolio Credit Risk Measurement (Michael B. Gordy). 8.1 Introduction. 8.2 Granularity adjustment of VaR for homogeneous portfolios. 8.3 Granularity adjustment of ES for homogeneous portfolios. 8.4 Application to heterogeneous portfolios. Appendix: Wilde’s formula for ?. Acknowledgements. References. 9 A Comparison of Value-at-Risk Models in Finance (Simone Manganelli and Robert F. Engle). 9.1 Introduction. 9.2 Value-at-risk methodologies. 9.2.1 Parametric models. 9.2.2 Nonparametric models. 9.2.3 Semiparametric models. 9.3 Expected shortfall. 9.4 Monte Carlo simulation. 9.4.1 Simulation study of the threshold choice for EVT. 9.4.2 Comparison of quantile methods performance. 9.5 Conclusion. References. Appendix: Tables. PART II: NEW RISK MEASURES. 10 Coherent Representations of Subjective Risk-Aversion (Carlo Acerbi). 10.1 Forewords and motivations. 10.1.1 In defense of axiomatics. 10.1.2 Scope and objectives. 10.1.3 Outline of the work. 10.2 Building a risk measure: the expected shortfall. 10.2.1 A close look into VaR’s definition. 10.2.2 A natural remedy to probe the tail: the expected shortfall. 10.2.3 Coherency of ES. 10.2.4 Estimation of ES. 10.3 Spectral measures of risk. 10.3.1 Estimation of spectral measures of risk. 10.3.2 Characterization of spectral measures via additional conditions. 10.3.3 Spectral measures and capital adequacy. 10.4 Optimization of spectral measures of risk. 10.4.1 Coherent measures and convex risk surfaces. 10.4.2 Minimization of expected shortfall. 10.4.3 Minimization of general spectral measures. 10.4.4 Risk–reward optimization. 10.5 Statistical errors of spectral measures of risk. 10.5.1 Variance of the estimator. 10.5.2 Some meaningful examples. Acknowledgements. References. 11 Spectral Risk Measures for Credit Portfolios (Claudio Albanese and Stephan Lawi). 11.1 Introduction. 11.2 Test-portfolios with market risk and entity-specific risk. 11.3 Properties of risk measures. 11.4 Discussion of test-portfolios. 11.5 Concluding remarks. Acknowledgements. References. Appendix: Tables. 12 Dynamic Convex Risk Measures (Marco Frittelli and Emanuela Rosazza Gianin). 12.1 Introduction. 12.1.1 Notation. 12.1.2 Axioms. 12.1.3 Coherent risk measures. 12.2 Convex risk measures. 12.2.1 Representation of convex risk measures. 12.2.2 Law-invariant convex risk measures. 12.3 Indifferent prices and risk measures. 12.4 Dynamic risk measures. 12.5 Appendix. References. 13 A Risk Measure for Income Processes (Georg Ch. Pflug and Andrzej Ruszczyński) 13.1 Introduction. 13.2 The one-period case. 13.3 Risk of multi-period income streams. 13.4 Finite filtrations. 13.5 Properties of the risk measure. 13.6 Mean–risk models. 13.7 Examples. 13.8 A comparison with the ADEHK approach. 13.9 The discounted martingale property for final processes. References. PART III: COPULA FUNCTIONS FOR THE ANALYSIS OF DEPENDENCE STRUCTURES. 14 Financial Applications of Copula Functions (Jean-Frédéric Jouanin, Gaëulet and Thierry Roncalli). 14.1 Introduction. 14.2 Copula functions. 14.3 Market risk management. 14.3.1 Non-Gaussian value-at-risk. 14.3.2 Stress testing. 14.3.3 Monitoring the risk of the dependence in basket derivatives. 14.4 Credit risk management. 14.4.1 Measuring the risk of a credit portfolio. 14.4.2 Modelling basket credit derivatives. 14.5 Operational risk management. 14.5.1 The loss distribution approach. 14.5.2 The diversification effect. References. 15 Hedge Funds: A Copula Approach for Risk Management (Hélyette Geman and Cécile Kharoubi). 15.1 Introduction. 15.2 Hedge funds industry, strategies and data. 15.2.1 Hedge funds industry: definitions and description. 15.2.2 The different strategies. 15.2.3 Biases in hedge funds data. 15.2.4 Hedge funds indices: descriptive statistics. 15.3 Copulas and hedge funds. 15.4 Value-at-risk with copulas. 15.4.1 Monte Carlo simulation. 15.4.2 Value-at-risk computation. 15.5 Conclusion. Acknowledgements. References. 16 Change-point Analysis for Dependence Structures in Finance and Insurance (Alexandra Dias and Paul Embrechts). 16.1 Introduction. 16.2 Statistical change-point analysis. 16.2.1 The test statistic. 16.2.2 An example: the Gumbel case. 16.2.3 The power of the test. 16.2.4 The time of the change and corresponding confidence intervals. 16.2.5 Multiple changes. 16.3 A comment on pricing. 16.4 An example with insurance data. 16.5 Conclusion. Acknowledgements. References. PART IV: ADVANCED APPLICATIONS. 17 Derivative Portfolio Hedging Based on CVaR (Siddharth Alexander, Thomas F. Coleman and Yuying Li). 17.1 Introduction. 17.2 Minimizing VaR and CVaR for derivative portfolios. 17.2.1 How well is the minimum risk derivative portfolio defined? 17.2.2 Difficulties due to ill-posedness. 17.3 Regularizing the derivative CVaR optimization. 17.3.1 Example 1: Hedging a short maturity at-the-money call. 17.3.2 Example 2: Hedging a portfolio of binary options. 17.4 Minimizing CVaR efficiently. 17.4.1 Efficiency for CVaR minimization using an LP approach. 17.4.2 A smoothing technique for CVaR minimization. 17.5 Concluding remarks. Acknowledgements. References. 18 Estimation of Tail Risk and Portfolio Optimisation with Respect to Extreme Measures (Giorgio Consigli). 18.1 Introduction. 18.2 From risk measurement to risk control: the setup. 18.2.1 VaR control with non-normal return distributions. 18.3 Beyond VaR: From non coherent to coherent measures. 18.3.1 Risk measures in the tails: methods accuracy. 18.3.2 A case study. Application 1: Risk measurement. 18.3.3 Multidimensional Poisson–Gaussian model. 18.4 Risk control based on portfolio optimization. 18.4.1 Risk–return and trade-off optimisation: QP and LP solvability. 18.4.2 Optimal portfolios during periods of market instability. 18.5 Conclusions and future research. Acknowledgements. References. 19 Risk Return Management Approach for the Bank Portfolio (Ursula A. Theiler). 19.1 Introduction. 19.2 Step 1 of the RRM approach: optimization model for the bank portfolio. 19.2.1 Survey. 19.2.2 Modeling the internal risk constraint. 19.2.3 Integration of the regulatory risk constraint into the optimization model. 19.2.4 Summary of the optimization model of step 1 of the RRM Approach. 19.3 Step 2 of the RRM Approach: risk return keys for the optimum portfolio. 19.3.1 Survey. 19.3.2 Derivation of risk return keys on the asset level. 19.3.3 Aggregation of risk return keys on the profit center level. 19.3.4 Summary of the risk return ratios generated by the RRM Approach. 19.4 Application example. 19.4.1 Situation and problem statement. 19.4.2 Results. 19.5 Conclusion. References. PART V: LAST, BUT NOT LEAST. 20 Capital Allocation, Portfolio Enhancement and Performance Measurement: A Unified Approach (Winfried G. Hallerbach). 20.1 Introduction. 20.2 Preliminaries. 20.3 Portfolio optimization, RAROC and RAPM. 20.3.1 Portfolio optimization without risk-free rate. 20.3.2 Portfolio optimization allowing for risk-free activities. 20.4 Conclusions. Appendix. Acknowledgements. References. 21 Pricing in Incomplete Markets: From Absence of Good Deals to Acceptable Risk (H´elyette Geman and Dilip B. Madan). 21.1 Introduction 451 21.2 No-good-deal pricing in incomplete markets. 21.2.1 Good-deal asset price bounds (Cochrane and Saá, 2000). 21.2.2 Gain, loss and asset pricing (Bernardo and Ledoit, 2000). 21.2.3 The theory of good-deal pricing (Cerny and Hodges, 2001). 21.3 Pricing with acceptable risk. 21.3.1 The economic model. 21.3.2 The first fundamental theorem. 21.3.3 The second fundamental theorem. 21.3.4 Pricing under acceptable incompleteness. 21.4 Conclusion. References. Index.

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Book SynopsisAddressing the mathematics of copula functions, this book explains copulas by means of applications to major topics in derivative pricing and credit risk analysis. It focuses on the pricing of asset-backed securities and basket credit derivative products and the evaluation of counterparty risk in derivative transactions.Trade Review"...This book is of great use for researchers as well as practitioners..." (Statistical Papers, July 2005)Table of ContentsPreface xi List of Common Symbols and Notations xv 1 Derivatives Pricing, Hedging and Risk Management: The State of the Art 1 1.1 Introduction 1 1.2 Derivative pricing basics: the binomial model 2 1.3 The Black–Scholes model 7 1.4 Interest rate derivatives 13 1.5 Smile and term structure effects of volatility 18 1.6 Incomplete markets 21 1.7 Credit risk 27 1.8 Copula methods in finance: a primer 37 2 Bivariate Copula Functions 49 2.1 Definition and properties 49 2.2 Fr´echet bounds and concordance order 52 2.3 Sklar’s theorem and the probabilistic interpretation of copulas 56 2.4 Copulas as dependence functions: basic facts 70 2.5 Survival copula and joint survival function 75 2.6 Density and canonical representation 81 2.7 Bounds for the distribution functions of sum of r.v.s 84 2.8 Appendix 87 3 Market Comovements and Copula Families 95 3.1 Measures of association 95 3.2 Parametric families of bivariate copulas 112 4 Multivariate Copulas 129 4.1 Definition and basic properties 129 4.2 Frechet bounds and concordance order: the multidimensional case 133 4.3 Sklar's theorem and the basic probabilistic interpretation: the multidimensional case 135 4.4 Survival copula and joint survival function 140 4.5 Density and canonical representation of a multidimensional copula 144 4.6 Bounds for distribution functions of sums of n random variables 145 4.7 Multivariate dependence 146 4.8 Parametric families of n-dimensional copulas 147 5 Estimation and Calibration from Market Data 153 5.1 Statistical inference for copulas 153 5.2 Exact maximum likelihood method 154 5.3 IFM method 156 5.4 CML method 160 5.5 Non-parametric estimation 161 5.6 Calibration method by using sample dependence measures 172 5.7 Application 174 5.8 Evaluation criteria for copulas 176 5.9 Conditional copula 177 6 Simulation of Market Scenarios 181 6.1 Monte Carlo application with copulas 181 6.2 Simulation methods for elliptical copulas 181 6.3 Conditional sampling 182 6.4 Marshall and Olkin’s method 188 6.5 Examples of simulations 191 7 Credit Risk Applications 195 7.1 Credit derivatives 195 7.2 Overview of some credit derivatives products 196 7.3 Copula approach 202 7.4 Application: pricing and risk monitoring a CDO 210 7.5 Technical appendix 225 8 Option Pricing with Copulas 231 8.1 Introduction 231 8.2 Pricing bivariate options in complete markets 232 8.3 Pricing bivariate options in incomplete markets 239 8.4 Pricing vulnerable options 243 8.5 Pricing rainbow two-color options 253 8.6 Pricing barrier options 267 8.7 Pricing multivariate options: Monte Carlo methods 278 Bibliography 281 Index 289

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Book SynopsisThe politics of business have become the business of politics. Across the world the lesson is clear: just as too much governmental interference leads to dysfunctional economies, left to its own devices the market is incapable of adequate self regulation. This work deals with this topic.Trade Review"…there is much useful information in this book, it is probably of greater interest to the specialist academic…" (Professional Investor, October 2003)Table of ContentsForeword vii Acknowledgements xi Introduction: the corruption cycle 1 1 Assessing guilt: the Wall Street shakedown 37 2 Power failure: the fall of Enron 71 3 An appalling vista: the rogue of Rhode Island 115 4 Lynching Merrill 141 5 Enforcing the enforcers: the politics of business 175 6 Corporate politics: the buying of power 219 7 From Chicago to Washington via New York and Baghdad 247 Index 285

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Book SynopsisA practical guide to inflation indexed securities. It charts the evolution of indexation to the basis of a new asset class. It also details the issues facing those designing indexed securities, illustrating them wherever possible with actual examples from the international capital markets.Table of ContentsList of Exhibits. List of Figures. List of Tables. About the Authors. Foreword by Sir Edward George. Preface to the Second Edition. Acknowledgements. Disclaimer. List of Abbreviations. 1 What Are Inflation-indexed Securities and Derivatives? 1.1 A historical perspective. 1.2 How indexed bonds work. 1.3 The role of derivatives. 2 Security Design. 2.1 Choice of price index. 2.1.1 Index matching. 2.1.2 Index reliability and integrity. 2.1.3 Other practical considerations. 2.2 Cash flow structure. 2.2.1 Capital Indexed Bond (CIB). 2.2.2 Interest Indexed Bond (IIB). 2.2.3 Current Pay Bond (CPB). 2.2.4 Indexed Annuity Bond (IAB). 2.2.5 Indexed Zero-Coupon Bond (IZCB). 2.2.6 Other types of indexed bonds. 2.2.7 Cash flows of the different structures. 2.2.8 Factors that influence the choice of security design. 2.3 Application of the index to the cash flows. 2.3.1 The problem of the indexation lag. 2.3.2 Why indexation lags are necessary. 2.3.3 How to minimise the indexation lag. 2.3.4 Full or partial indexation? 2.4 The impact of tax regulations. 2.4.1 Uncertainty of post-tax real yields. 2.4.2 The effect of income accrual rules. 2.5 Options on indexed bonds. 2.5.1 Callable bonds. 2.5.2 Puttable bonds. 2.5.3 Convertible bonds. 2.6 Method of issue. 2.6.1 Pricing. 2.6.2 Cost-effectiveness and market development. 2.6.3 Consistency with other instruments. 2.6.4 What happens in practice? 2.7 Summary. Appendices. A2.1 Calculating the base annuity payment for Indexed Annuity Bonds (IABs). A2.2 Barro’s proposal for revising the inflation adjustment of payments on index-linked gilts. 3 Why Invest in Indexed Debt? 3.1 Reducing inflation risk. 3.2 Relative stability of returns. 3.3 Performance relative to conventional bonds and equities. 3.4 Total return opportunities. 3.5 Duration and other cash flow considerations. 3.6 Taxation. 3.7 Liquidity. 3.8 Other potential deterrents to investing in indexed bonds. 3.9 Alternatives to indexed bonds. 3.9.1 Treasury bills. 3.9.2 Equities. 3.9.3 Property. 3.10 Summary. 4 Why Issue Indexed Bonds? 4.1 Why governments issue indexed bonds. 4.1.1 Reducing borrowing costs: the role of inflation expectations. 4.1.2 Reducing borrowing costs: saving the inflation risk premium. 4.1.3 Risk management. 4.1.4 Inflation-indexed bonds and monetary policy. 4.1.5 Maintaining long-term capital markets in difficult economic conditions. 4.2 Why private corporations issue indexed bonds. 4.3 The relative scarcity of index-linked bonds. 4.4 Summary. 5 Inflation and Real Interest Rate Analysis. 5.1 Measures of real interest rates. 5.1.1 Real gross redemption yields. 5.1.2 Hedge ratios: the duration and "beta" of inflation-indexed bonds. 5.1.3 The term structure of real interest rates. 5.2 Measures of inflation expectations. 5.2.1 Break-even inflation rates. 5.2.2 The "inflation term structure". 5.2.3 The inflation risk premium and bond convexity. 5.3 Analysis of real interest rates and inflation expectations. 5.3.1 Real interest rates. 5.3.2 Measures of inflation expectations. 5.4 Summary. 6 Major International Indexed Bond Markets. 6.1 Australia. 6.1.1 A brief history of indexation in Australia. 6.1.2 The structure of the Commonwealth Treasury Indexed Bond (TIB) market. 6.2 Canada. 6.3 France. 6.3.1 The history of indexation in France. 6.3.2 The introduction of inflation-indexed OATs (Obligations assimilables du Trésor). 6.3.3 Indexation to pan-European inflation – OATc€ i bonds. 6.4 Sweden. 6.4.1 The formation of the Swedish government index-linked bond market. 6.4.2 The development of the market toward international standards. 6.4.3 Recent developments. 6.5 United Kingdom. 6.5.1 A brief history of the index-linked gilt market. 6.5.2 The structure of the index-linked gilt market. 6.5.3 The market for non-government index-linked bonds in the UK. 6.6 United States of America. 6.6.1 A brief history of indexation in the USA. 6.6.2 The launch of the Treasury Inflation-Indexed Securities (TIIS) market. 6.6.3 The expansion of the TIIS programme in the fiscal surplus years. 6.6.4 Recent developments in the market for inflation-indexed securities in the USA. Appendices. A6.1 Cash flow calculations for Australian Capital Indexed Bonds (CIBs). A6.1.1 Calculation of interest payments. A6.1.2 Calculation of the settlement price. A6.2 Cash flow calculations for Canadian Real Return Bonds (RRBs). A6.2.1 Indexing process. A6.2.2 Calculation of interest payments. A6.2.3 Calculation of the redemption payment. A6.2.4 Calculation of the settlement price. A6.3 Cash flow calculations for French OATi and OATc€ i bonds. A6.3.1 Indexing process. A6.3.2 Calculation of interest payments. A6.3.3 Calculation of the redemption payment. A6.3.4 Calculation of the settlement price. A6.4 Cash flow calculations for Swedish index-linked Treasury bonds. A6.4.1 Indexing process. A6.4.2 Calculation of interest payments (for coupon-bearing bonds). A6.4.3 Calculation of the redemption payment. A6.4.4 Calculation of the settlement price. A6.5 Cash flow calculations for UK Index-linked Gilts (IGs). A6.5.1 Indexing process. A6.5.2 Calculation of interest payments. A6.5.3 Calculation of the redemption payment. A6.5.4 Calculation of accrued interest. A6.5.5 Calculation of real yields. A6.6 Cash flow calculations for US Treasury Inflation-Indexed Securities (TIIS). A6.6.1 Indexing process. A6.6.2 Calculation of interest payments. A6.6.3 Calculation of the redemption payment. A6.6.4 Calculation of the settlement price. 7 Other Indexed Bond Markets. 7.1 Argentina. 7.2 Austria. 7.3 Bolivia. 7.4 Brazil. 7.4.1 1964–1986 Readjustable National Treasury Obligations (ORTNs). 7.4.2 1986–today National Treasury Obligations (OTNs), Treasury Bonds (BTNs) and National Treasury Notes (NTNs). 7.5 Chile. 7.6 Colombia. 7.7 Czech Republic. 7.8 Denmark. 7.9 Finland. 7.10 Germany. 7.11 Greece. 7.12 Hungary. 7.13 Iceland. 7.14 India. 7.15 Ireland. 7.16 Israel. 7.17 Italy. 7.18 Japan. 7.19 Kazakhstan. 7.20 Mexico. 7.21 Netherlands. 7.22 New Zealand. 7.23 Norway. 7.24 Peru. 7.25 Poland. 7.26 Portugal. 7.27 South Africa. 7.28 Spain. 7.29 Switzerland. 7.30 Turkey. Appendices. A7.1 Calculation of the settlement price for Colombian TES-UVR bonds. A7.1.1 Calculation of the settlement price. A7.1.2 Price calculation example. A7.2 Calculation of the settlement price for Icelandic Treasury Bonds. A7.2.1 Indexing process. A7.2.2 Calculation of the settlement price. A7.2.3 Price calculation example. A7.3 Calculation of real yields for Israeli inflation-indexed bonds. A7.3.1 Sagi and Galil bonds. A7.3.2 Kfir bonds. A7.4 Cash flow calculations for New Zealand Treasury inflation-indexed bonds. A7.4.1 Calculation of interest payments. A7.4.2 Calculation of the settlement price. A7.5 Exchange rates. 8 Inflation-linked Derivatives: Market Description. 8.1 Overview. 8.1.1 Introduction. 8.1.2 Why Inflation-linked (IL) derivatives? 8.1.3 The Inflation-linked (IL) derivatives markets in 2003. 8.2 A brief history of Inflation-linked derivatives markets. 8.2.1 Early history. 8.2.2 The UK market. 8.2.3 The French and Euro-zone markets. 8.2.4 The Swedish market. 8.2.5 Non-European markets. 8.3 Inflation payers (issuers). 8.3.1 Standard derivative solutions for Inflation-linked (IL) issuers. 8.3.2 Private Finance Initiative (PFI) projects in the UK. 8.3.3 UK housing associations. 8.3.4 Swap structures to mitigate credit exposure. 8.4 Inflation receivers (investors). 8.4.1 The use of inflation swaps to hedge pension liabilities. 8.4.2 Inflation-guaranteed and Inflation-linked (IL) retail products. 8.5 Inflation options. 8.5.1 Options embedded in bonds. 8.5.2 Standalone inflation options in the Over The Counter (OTC) market. 8.6 Future trends. 8.6.1 Market standardization. 8.6.2 Pension reforms in Europe. 8.6.3 The implications of changes to accounting standards. 8.6.4 Further development of the inflation derivatives markets. Appendix. A8.1 Example swap and option structures. A8.1.1 Capital Indexed Bond (CIB)-style swaps. A8.1.2 Real annuity swaps. A8.1.3 Interest Indexed Bond (IIB)-style swaps. A8.1.4 Standard inter-dealer broker market structures. 9 Inflation-linked Derivatives: Pricing, Hedging and Other Technical Aspects. 9.1 Outline. 9.2 Pricing approaches. 9.2.1 What is meant by ‘‘pricing’’? 9.2.2 Four levels of pricing. 9.2.3 Level I. 9.2.4 Level II. 9.2.5 Level III. 9.2.6 Level IV. 9.3 Deriving a forward Consumer Price Index (CPI) curve for Level II and III markets. 9.3.1 Piecewise linear continuous function in CPI space. 9.3.2 Piecewise linear continuous function in inflation space. 9.4 ‘‘Level I’’ markets in Europe: intraregional Euro-zone inflation spreads. 9.5 Alternative approaches to the construction of inflation curves. 9.6 Asset swaps – connecting swap and bond prices. 9.7 Hedging a swapped new issue. 9.7.1 A simple ‘‘interim’’ hedge. 9.7.2 A more precise hedge. 9.7.3 A portfolio hedge for net outright inflation risk. 9.8 The evolution of the Euro-zone HICPswap market. 9.8.1 Seven lessons from seven months of Euro-zone inflation swap data. 9.9 Historical estimation of price index volatilities. 9.10 Pricing inflation options. 9.10.1 Zero percent zero-coupon floors. 9.10.2 Year-on-year inflation floors. 9.11 Summary. 10 Conclusion. References. Bibliography. Useful websites. Index.

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Book SynopsisThe decade since the publication of the Cadbury Report in1992 has seen growing interest in corporate governance. This growth has recently become an explosion with major corporate scandals such as WorldCom and Enron in the US, the international diffusion of corporate governance codes and wider interest in researching corporate governance in different institutional contexts and through different subject lenses. In view of these developments, this book will be a rigorousupdate and developmentof the editor's earlier work, Corporate Governance: Economic, Management and Financial Issues. Each chapter, written by an expert in the subject offers a high level review of the topic, embracing material from financial accounting, strategy and economic perspectives.Trade Review“The closely argues material is relevant for students studying the subject on undergraduate or post-graduate programmes” (Professional Manager, July 2005)Table of ContentsAbout the contributors xi 1 Introduction (Kevin Keasey, Steve Thompson and Mike Wright). Introduction. Alternative perspectives on corporate governance. Background to corporate governance reform. Governance reforms: the early days. New perspectives from the 1990s. The volume’s contents. Notes. References. 2 The Development of Corporate Governance Codes in the UK (Kevin Keasey, Helen Short and Mike Wright). Introduction. Corporate governance in the UK – definitions and framework. The evolution of policy recommendations – from Cadbury to Hampel. The evolution of governance policy – from Combined Code I to Combined Code II. Overview of policy evolution. Conclusion. Notes. References. 3 Financial Structure and Corporate Governance (Robert Watson and Mahmoud Ezzamel). Introduction. Capital structure and financial risk. Does capital structure matter? The agency costs of debt. Employees as residual claimants. Notes. References. 4 Institutional Shareholders and Corporate Governance in the UK (Helen Short and Kevin Keasey). Introduction. Institutional shareholdings in the UK. General overview of the objectives and incentives of institutions. The willingness and ability of institutions to intervene in the governance of corporations. Methods of intervention. Governance by institutional shareholders: empirical evidence. Summary and conclusions. Notes. References. 5 Boards of Directors and the Role of Non-executive Directors in the Governance of Corporations (Mahmoud Ezzamel and Robert Watson). Introduction. The corporate form, governance and the board of directors. The UK’s governance by disclosure. Conclusions. Notes. References. 6 Executive Pay and UK Corporate Governance (Alistair Bruce and Trevor Buck). Introduction. Executive pay and corporate governance in the UK: an overview. The empirical analysis of executive pay. Executive pay evolution in the UK. Performance indicator(s). Further discretionary elements in LTIP design. Mix of remuneration components. Disclosure. Conclusions. References. 7 Compensation Committees and Executive Compensation: Evidence from Publicly Traded UK Firms (Rocio Bonet and Martin J. Conyon). Introduction. Compensation committees and executive pay. Prior literature. New data and results. Discussion and conclusion. Notes. References. 8 The Governance Role of Takeovers (Noel O’Sullivan and Pauline Wong). Introduction. Takeovers and company performance. The likelihood of takeover success. Post-acquisition performance. Management turnover subsequent to takeover. The consequences of takeover failure. Conclusions. References. 9 Governance and Strategic Leadership in Entrepreneurial Firms (Catherine M. Dalton, Patricia P. McDougall, Jeffrey G. Covin and Dan R. Dalton). Introduction. Governance and strategic leadership do matter. CEOs/Founders. CEO duality. Top management teams. Boards of directors. Venture capitalists. Discussion: an opportunity lost. Conclusion. References. 10 Corporate Governance: The Role of Venture Capitalists and Buy-outs (Mike Wright, Steve Thompson and Andrew Burrows). Introduction. Theoretical issues. Empirical evidence. Conclusions. Notes. References. 11 Explaining Western Securities Markets (Mark J. Roe). Introduction. The argument: corporate law as propelling diffuse ownership. Corporate law’s limits. Data: political variables as the strongest predictor of ownership separation. Conclusion: politics and corporate law as explanations for securities markets. Notes. References. 12 International Corporate Governance (Diane K. Denis and John J. McConnell). Introduction. First generation international corporate governance research. Second generation international corporate governance research. Convergence in corporate governance systems. Conclusion and directions for future research. Notes. References. 13 Corporate Governance in Germany (Marc Goergen, Miguel C. Manjon and Luc Renneboog). Introduction. Ownership and control. Internal corporate governance mechanisms. External corporate governance mechanisms. The recent evolution of corporate governance regulation and stock exchange structures. Conclusion. Notes. References. 14 Network Opportunities and Constraints in Japan’s Banking Industry: A Social Exchange Perspective on Governance (William P. Wan, Robert E. Hoskisson, Hicheon Kim and Daphne Yiu). Introduction. Japan’s main bank system. A social exchange approach to Japan’s banking networks. Opportunities and constraints in Japan’s banking networks. Implications and conclusion. Notes. References. 15 Analysing Change in Corporate Governance: The Example of France (Mary O’Sullivan). Introduction. Understanding systems of corporate governance. The ownership and financing of French corporations. Implications for French corporate governance. The role of structure in corporate governance. Conclusion. Notes. References. 16 Ownership and Control of Chinese Public Corporations: A State-dominated Corporate Governance System (Guy S. Liu and Pei Sun). Introduction. Overview of the Chinese corporate governance system. Ultimate ownership, intermediate shareholding classes, and their relation to corporate performance. The evolution of ownership and control and its determinants. Concluding remarks. Notes. References. 17 Corporate Governance in Transition Economies (Mike Wright, Trevor Buck and Igor Filatotchev). Introduction. Corporate governance and differing privatisation approaches in transition economies. Corporate governance in transition economies. Post-privatisation governance. Studies of the effects of different ownership and governance forms. Conclusions. Notes. References. Index.

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Book SynopsisThe pressure to maintain currency parity has led to the breakdown of many exchange rate mechanisms, and has forced the need for active foreign exchange hedging decisions to prevent the erosion of profit margins. Today, an understanding of currency options is essential for those working in investment and foreign exchange.Table of ContentsDisclaimer xi 1 Introduction 1 1.1 The forward foreign exchange market 1 1.2 The currency options market 1 1.3 The alternatives to currency options 2 1.4 The users 2 1.5 Whose domain? 2 PART I MARKET OVERVIEW 3 2 The Foreign Exchange Market 5 2.1 Twenty-four-hour global market 5 2.2 Value terms 5 2.3 Coffee houses 6 2.4 Spot and forward market 6 2.5 Alternative markets 7 2.6 Currency options 7 2.7 Concluding remarks 8 3 A Brief History of the Market 9 3.1 The barter system 9 3.2 The introduction of coinage 9 3.3 The expanding British Empire 10 3.4 The gold standard 10 3.5 The Bretton Woods system 11 3.6 The International Monetary Fund and the World Bank 11 3.7 The dollar rules OK 12 3.8 Special drawing rights 12 3.9 A dollar problem 13 3.10 The Smithsonian agreement 13 3.11 The snake 13 3.12 The dirty float 13 3.13 The European Monetary System 14 3.14 The Exchange Rate Mechanism 14 3.15 The European Currency Unit 15 3.16 The Maastricht Treaty 15 3.17 The Treaty of Rome 15 3.18 Economic reform 16 3.19 A common monetary policy 16 3.20 A single currency 16 3.21 Currency options 18 3.22 Concluding remarks 20 4 Market Overview 21 4.1 Global market 21 4.2 No physical trading floor 21 4.3 A “perfect” market 21 4.4 The main instruments 22 4.5 Comparisons of options with spot and forwards 23 4.6 The dollar’s role 24 4.7 Widely traded currency pairs 24 4.8 Concluding remarks 25 5 Major Participants 27 5.1 Governments 27 5.2 Banks 27 5.3 Brokering houses 29 5.4 International Monetary Market 29 5.5 Money managers 29 5.6 Corporations 29 5.7 Retail clients 29 5.8 Others 30 5.9 Speculators 30 5.10 Trade and financial flows 30 6 Roles Played 33 6.1 Market makers 33 6.2 Price takers 33 6.3 A number of roles 33 6.4 A number of roles – options 34 6.5 Concluding remarks 34 7 Purposes 35 7.1 Commercial transactions 35 7.2 Funding 35 7.3 Hedging 35 7.4 Portfolio investment 36 7.5 Personal 36 7.6 Market making 36 7.7 Transaction exposure 36 7.8 Translation exposure 37 7.9 Economic exposure 37 7.10 Concluding remarks 37 8 Applications of Currency Options 39 9 Users of Currency Options 41 9.1 Variety of reasons 41 9.1.1 Example 1 42 9.1.2 Example 2 43 9.1.3 Example 3 43 9.2 Hedging vs speculation 44 Glossary of foreign exchange terms 45 PART II CURRENCY OPTIONS – THE ESSENTIALS 47 10 Definitions and Terminology 49 10.1 Call option 50 10.2 Put option 50 10.3 Parties and the risks involved 51 10.4 Currency option risk/reward perception 51 10.5 Currency or dollar call or put option? 52 10.6 Strike price and strike selection 52 10.7 Exercising options 53 10.8 American and European style options 53 10.9 In-, at- or out-of-the-money 55 10.10 The premium 57 10.11 Volatility 59 10.12 Break-even 60 11 The Currency Option Concept 61 12 The Currency Options Market 63 12.1 Exchange vs over-the-counter 63 12.2 Standardised Options 65 12.3 Customised options 66 12.4 Features of the listed market 67 12.5 Comparisons 69 12.6 Where is the market? 69 12.7 Concluding remarks 69 13 Option Pricing Theories 71 13.1 Basic properties 71 13.2 Theoretical valuation 72 13.3 Black-Scholes model 73 13.4 Examples of other models 74 13.5 Pricing without a computer model 76 13.6 Educated guess 76 13.7 The price of an option 76 13.8 Option premium profile 78 13.9 Time value and intrinsic value 78 13.10 Time to expiry 79 13.11 Volatility 79 13.12 Strike price and forward rates 82 13.13 Interest rates 82 13.14 American vs European 83 13.15 Concluding remarks 84 14 The Greeks 85 14.1 Delta 85 14.2 Gamma 88 14.3 Theta 90 14.4 Vega 92 14.5 Rho 92 14.6 Beta and omega 93 15 Payoff and Profit/Loss Diagrams 95 15.1 Payoff diagram 95 15.2 Profit diagram 95 15.3 The option writer 97 15.4 Put option 97 15.5 Put option writer 98 15.6 Basic option positions 98 15.7 Graph addition 100 15.8 Profit/loss profiles for ten popular option strategies 101 15.9 Concluding remarks 102 16 Basic Properties of Options 105 16.1 Option values 105 16.2 Put/call parity concept 106 16.3 Synthetic positions 108 17 Risk Reversals 111 17.1 Understanding risk reversals 111 17.2 Implications for traders 112 17.3 Implications for hedgers 113 17.4 Concluding remarks 114 18 Market Conventions 115 18.1 Option price 115 18.2 What rate to use? 116 18.3 Live price 116 18.4 Pricing terms 117 18.5 Premium conversions 117 18.6 Settlement 117 18.7 How is an option exercised? 118 18.8 Risks 118 18.9 Concluding remarks 119 Basic option glossary 121 PART III CURRENCY OPTION PRODUCTS 125 19 Vanilla Options 127 19.1 Long options 127 19.2 Short options 127 19.3 Straddle 128 19.4 Strangle 129 19.5 Cylinder 130 19.6 Collar 131 19.7 Participating forward 131 19.8 Ratio forward 132 19.9 Added extras to vanilla options 133 20 Common Option Strategies 135 20.1 Directional options 137 20.2 Precision options 139 20.3 Locked trade options 144 21 Exotic Options 145 21.1 Barriers 145 21.2 Average rates 148 21.3 Lookback and ladder 149 21.4 Chooser 152 21.5 Digital (binary) 153 21.6 Baskets 154 21.7 Compound 156 21.8 Variable notional 157 21.9 Multi-factor 158 22 Structured Currency Options 159 22.1 Trigger forward 159 22.2 Double trigger forward 160 22.3 At maturity trigger forward 161 22.4 Forward extra 161 22.5 Weekly reset forward 162 22.6 Range binary 163 22.7 Contingent premium 163 22.8 Wall 164 22.9 Corridor 165 23 Case Studies 167 23.1 Hedging 167 23.2 Trading 169 23.3 Investment 170 23.4 Bid to offer exposure 171 23.5 Concluding remarks 173 24 Option Hedge Matrix 175 Exotic currency option glossary 187 25 Concluding Remarks 193 Index 195

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Book SynopsisOffers an approach to the age-old battle of profitable investing in uncertain times. This book provides an insight into some of the leading characters in the investment industry and how their alternative investment styles have worked during the biggest bear market in a generation.Trade Review “…part of the appeal of the book is that it’s structure is fluid enough to accommodate very different investment approaches…” (The Technical Analyst, November/December 2004) "...Cutmore’s book is a thoroughly entertaining tour of the investment industry…" (accountingweb.co.uk)Table of ContentsPreface. Acknowledgements. Part I: THE HEDGE FUND MANAGERS. 1. Hugh Hendry: The Antithesis of the Past. 2. Michael Browne: European Value Stocks. 3. David Murrin: Trading the Roadmap. 4. Philip Manduca: The Coming Crisis. Part II: TECHNICAL TRADERS. 5. Chris Locke: Elliott Wave and the Planets. 6. Richard Cunningham: Leveraging Up. Part III: FUND OF FUNDS AND THE HISTORIAN. 7. Peter Toogood: Picking the Best of the Best. 8. David Schwartz: Stock Market Historian. Conclusion. APPENDICES. I. Hugh Hendry: The Odey Eclectica Reports. II. Michael Browne: Sofaer Fund Reports. III. David Murrin: Emergent Fund Strategy. IV. Philip Manduca: Titanium Fund Reports. V. Chris Locke: Oystercatcher Management. VI. Richard Cunningham: Asset Management. VII. Peter Toogood: Forsyth Reports. VIII. David Schwartz: Dates. Index.

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Book SynopsisCovers various aspects of C# relevant to practitioners working in financial sector. This work contains a practical workshop which builds on the material given, and guides you through all the stages of building a multiple model options calculator.Table of ContentsList of Examples. List of Figures. List of Tables. Preface. 1 What is .NET and how does C# fit in? 1.1 .NET framework and the common language runtime. 2 The Basics of C#. 2.1 Assignment, mathematic, logical and conditional operators. 2.1.1 Assignment operator. 2.1.2 Mathematical operators. 2.1.3 Calculate and re-assign operators += −=*= /=. 2.1.4 Logical operators. 2.1.5 Operator precedence. 2.2 Data structures. 2.2.1 Built-in types. 2.2.2 Casting and type converting. 2.2.3 Strings. 2.2.4 StringBuilder. 2.2.5 Regex. 2.2.6 Arrays. 2.2.7 Collections. 2.3 Control structures. 2.3.1 if/else. 2.3.2 switch. 2.3.3 while. 2.3.4 do/while. 2.3.5 for loop. 2.3.6 foreach loop. 2.4 Summary. 3 Object Oriented Programming. 3.1 Introduction to classes. 3.1.1 Exception handling. 3.1.2 User defined exception class. 3.1.3 Workshop: Exercise one. 3.2 Inheritance and polymorphism. 3.2.1 Applying inheritance and polymorphism to finance. 3.2.2 Interfaces. 3.2.3 Multiple threading or asynchronous programming. 3.2.4 Workshop: Exercise two. 3.3 Summary. 4 Databases. 4.1 ADO.NET object model. 4.2 Connecting to the database. 4.3 Connection pools. 4.4 Database handler. 4.5 Working with data. 4.6 Transactions. 4.7 Workshop: Exercise three. 4.8 Summary. 5 Input & Output. 5.1 Streams. 5.2 Serialisation. 5.3 Workshop: Exercise four. 5.4 Summary. 6 XML. 6.1 Schema validation. 6.2 XML and ADO.NET. 6.3 Workshop: Exercise five. 6.4 Summary. 7 Building Windows Applications. 7.1 Creating a new project in visual studio.NET. 7.2 Managing projects with the Solution explorer and class view. 7.3 Working with components on forms. 7.3.1 Model view control. 7.4 Workshop Exercise six. 7.5 Summary. 8 Deployment. 8.1 Assemblies. 8.1.1 Metadata. 8.1.2 Shared assemblies. 8.2 Summary. Bibliography. Appendices. Appendix A: Specification for an options calculator. Appendix B: System design. Appendix C: Calculation models. Index.

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