{"product_id":"market-consistency-9780470770887","title":"Market Consistency","description":"\u003cb\u003eBook Synopsis\u003c\/b\u003e\u003cbr\u003eAchieving market consistency can be challenging, even for the most established finance practitioners. In \u003ci\u003eMarket Consistency: Model Calibration in Imperfect Markets\u003c\/i\u003e, 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.  \u003cp\u003eThis 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 a\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTable of Contents\u003c\/b\u003e\u003cbr\u003ePreface.  \u003c\/p\u003e\u003cp\u003eAcknowledgements.\u003c\/p\u003e \u003cp\u003eAbbreviations.\u003c\/p\u003e \u003cp\u003eNotation.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Introduction.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Market consistency.\u003c\/p\u003e \u003cp\u003e1.2 The primacy of the ‘market.\u003c\/p\u003e \u003cp\u003e1.3 Calibrating to the ‘market’.\u003c\/p\u003e \u003cp\u003e1.4 Structure of the book.\u003c\/p\u003e \u003cp\u003e1.5 Terminology.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 When is and when isn’t Market Consistency Appropriate?\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Introduction.\u003c\/p\u003e \u003cp\u003e2.2 Drawing lessons from the characteristics of money itself.\u003c\/p\u003e \u003cp\u003e2.3 Regulatory drivers favouring market consistent valuations.\u003c\/p\u003e \u003cp\u003e2.4 Underlying theoretical attractions of market consistent valuations.\u003c\/p\u003e \u003cp\u003e2.5 Reasons why some people reject market consistency.\u003c\/p\u003e \u003cp\u003e2.6 Market making versus position-taking.\u003c\/p\u003e \u003cp\u003e2.7 Contracts that include discretionary elements.\u003c\/p\u003e \u003cp\u003e2.8 Valuation and regulation.\u003c\/p\u003e \u003cp\u003e2.9 Marking-to-market versus marking-to-model.\u003c\/p\u003e \u003cp\u003e2.10 Rational behaviour?\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Different Meanings given to ‘Market Consistent Valuations’.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Introduction.\u003c\/p\u003e \u003cp\u003e3.2 The underlying purpose of a valuation.\u003c\/p\u003e \u003cp\u003e3.3 The importance of the ‘marginal’ trade.\u003c\/p\u003e \u003cp\u003e3.4 Different definitions used by different standards setters.\u003c\/p\u003e \u003cp\u003e3.5 Interpretations used by other commentators.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Derivative Pricing Theory.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Introduction.\u003c\/p\u003e \u003cp\u003e4.2 The principle of no arbitrage.\u003c\/p\u003e \u003cp\u003e4.3 Lattices, martingales and Îto calculus.\u003c\/p\u003e \u003cp\u003e4.4 Calibration of pricing algorithms.\u003c\/p\u003e \u003cp\u003e4.5 Jumps, stochastic volatility and market frictions.\u003c\/p\u003e \u003cp\u003e4.6 Equity, commodity and currency derivatives.\u003c\/p\u003e \u003cp\u003e4.7 Interest rate derivatives.\u003c\/p\u003e \u003cp\u003e4.8 Credit derivatives.\u003c\/p\u003e \u003cp\u003e4.9 Volatility derivatives.\u003c\/p\u003e \u003cp\u003e4.10 Hybrid instruments.\u003c\/p\u003e \u003cp\u003e4.11 Monte Carlo techniques.\u003c\/p\u003e \u003cp\u003e4.12 Weighted Monte Carlo and analytical analogues.\u003c\/p\u003e \u003cp\u003e4.13 Further comments on calibration.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 The Risk-free Rate.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Introduction.\u003c\/p\u003e \u003cp\u003e5.2 What do we mean by ‘risk-free’?\u003c\/p\u003e \u003cp\u003e5.3 Choosing between possible meanings of ‘risk-free’.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Liquidity Theory.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Introduction.\u003c\/p\u003e \u003cp\u003e6.2 Market experience.\u003c\/p\u003e \u003cp\u003e6.3 Lessons to draw from market experience.\u003c\/p\u003e \u003cp\u003e6.4 General principles.\u003c\/p\u003e \u003cp\u003e6.5 Exactly what is liquidity?\u003c\/p\u003e \u003cp\u003e6.6 Liquidity of pooled funds.\u003c\/p\u003e \u003cp\u003e6.7 Losing control.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Risk Measurement Theory.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Introduction.\u003c\/p\u003e \u003cp\u003e7.2 Instrument-specific risk measures.\u003c\/p\u003e \u003cp\u003e7.3 Portfolio risk measures.\u003c\/p\u003e \u003cp\u003e7.4 Time series-based risk models.\u003c\/p\u003e \u003cp\u003e7.5 Inherent data limitations applicable to time series-based risk models.\u003c\/p\u003e \u003cp\u003e7.6 Credit risk modelling.\u003c\/p\u003e \u003cp\u003e7.7 Risk attribution.\u003c\/p\u003e \u003cp\u003e7.8 Stress testing.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Capital Adequacy.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Introduction.\u003c\/p\u003e \u003cp\u003e8.2 Financial stability.\u003c\/p\u003e \u003cp\u003e8.3 Banking.\u003c\/p\u003e \u003cp\u003e8.4 Insurance.\u003c\/p\u003e \u003cp\u003e8.5 Pension funds.\u003c\/p\u003e \u003cp\u003e8.6 Different types of capital.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Calibrating Risk Statistics to Perceived ‘Real World’ Distributions.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Introduction.\u003c\/p\u003e \u003cp\u003e9.2 Referring to market values.\u003c\/p\u003e \u003cp\u003e9.3 Backtesting.\u003c\/p\u003e \u003cp\u003e9.4 Fitting observed distributional forms.\u003c\/p\u003e \u003cp\u003e9.5 Fat-tailed behaviour in individual return series.\u003c\/p\u003e \u003cp\u003e9.6 Fat-tailed behaviour in multiple return series.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Calibrating Risk Statistics to ‘Market Implied’ Distributions.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Introduction.\u003c\/p\u003e \u003cp\u003e10.2 Market implied risk modelling.\u003c\/p\u003e \u003cp\u003e10.3 Fully market consistent risk measurement in practice.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Avoiding Undue Pro-cyclicality in Regulatory Frameworks.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Introduction.\u003c\/p\u003e \u003cp\u003e11.2 The 2007-09 credit crisis.\u003c\/p\u003e \u003cp\u003e11.3 Underwriting of failures.\u003c\/p\u003e \u003cp\u003e11.4 Possible pro-cyclicality in regulatory frameworks.\u003c\/p\u003e \u003cp\u003e11.5 Re-expressing capital adequacy in a market consistent framework.\u003c\/p\u003e \u003cp\u003e11.6 Discount rates.\u003c\/p\u003e \u003cp\u003e11.7 Pro-cyclicality in Solvency II.\u003c\/p\u003e \u003cp\u003e11.8 Incentive arrangements. \u003c\/p\u003e \u003cp\u003e11.9 Systemic impacts of pension fund valuations.\u003c\/p\u003e \u003cp\u003e11.10 Sovereign default risk.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Portfolio Construction.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Introduction.\u003c\/p\u003e \u003cp\u003e12.2 Risk-return optimisation.\u003c\/p\u003e \u003cp\u003e12.3 Other portfolio construction styles.\u003c\/p\u003e \u003cp\u003e12.4 Risk budgeting.\u003c\/p\u003e \u003cp\u003e12.5 Reverse optimisation and implied view analysis.\u003c\/p\u003e \u003cp\u003e12.6 Calibrating portfolio construction techniques to the market.\u003c\/p\u003e \u003cp\u003e12.7 Catering better for non-normality in return distributions.\u003c\/p\u003e \u003cp\u003e12.8 Robust optimisation.\u003c\/p\u003e \u003cp\u003e12.9 Taking due account other investors’ risk preferences.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 Calibrating Valuations to the Market.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Introduction.\u003c\/p\u003e \u003cp\u003e13.2 Price formation and price discovery.\u003c\/p\u003e \u003cp\u003e13.3 Market consistent asset valuations.\u003c\/p\u003e \u003cp\u003e13.4 Market consistent liability valuations.\u003c\/p\u003e \u003cp\u003e13.5 Market consistent embedded values.\u003c\/p\u003e \u003cp\u003e13.6 Solvency add-ons.\u003c\/p\u003e \u003cp\u003e13.7 Defined benefit pension liabilities.\u003c\/p\u003e \u003cp\u003e13.8 Unit pricing.\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 The Final Word.\u003c\/b\u003e \u003c\/p\u003e \u003cp\u003e14.1 Conclusions.\u003c\/p\u003e \u003cp\u003e14.2 Market consistent principles. \u003c\/p\u003e \u003cp\u003e\u003cb\u003eBibliography.\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eIndex.\u003c\/b\u003e\u003c\/p\u003e","brand":"John Wiley \u0026 Sons Inc","offers":[{"title":"Default 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