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Palgrave Macmillan

Models at Work

A Practitioner's Guide to Risk Management

ISBN 9781137371638
Publication Date January 2014
Formats Hardcover Ebook (EPUB) Ebook (PDF) 
Publisher Palgrave Macmillan
Series Global Financial Markets

Risk Management's greatest failure has been its inability to simplify its factual presentation and connect with board and executive team members in a language that they can understand and relate to. By using simple well established tools, Models at Work takes readers through a journey that cuts across models, frameworks, practice, data, markets, countries and case studies.

A central theme of the book it is that we need sophistication in analysis, not complexity in modeling; that risk models don't work in isolation and for a risk function to be successful it needs to focus on presenting results that are understood by broader audiences, not just the mathematically inclined.

Models at Work addresses these challenges and will demonstrate:

• how to measure the impact of volatility using simple and incrementally complex tools.
• how to translate the impact to changes in business results under stressed conditions, looking toward the distribution of volatility and Monte Carlo simulations rather than static value at risk models.
• the multiple flavors of value at risk as well as additional portfolio metrics.
• how to link target accounts and risk policy and examine the impact of both on designing risk systems.
• Monte Carlo simulation in Excel for simulating commodity prices, projecting business P&L and analyzing hedge effectiveness.
• price swaps, vanilla and exotic options in Excel.

If you have been searching for market relevant, background material on risk that can be shared with board members and business line managers, with technology, implementation and audit teams, with new arrivals in the compliance function or even business school students, this book is for you. It fills in the missing context that kills conversations around risk management. How do you measure and manage risk? How do you link risk to business drivers? How does risk work outside the financial services industry? Why doesn't Value at Risk work?

Using lay person language and simple tools, Models at Work answers questions raised by risk management practitioners and students around the world and will become a valuable resource for both audiences.

Jawwad Farid has been building and implementing risk models since August 1998. Working with clients on four continents he helps bankers, board members and regulators take a market relevant approach to risk management. He is the founder of Alchemy Technologies, a risk consulting practice and writes about risk and treasury products at FinanceTrainingCourse.com.

Jawwad's expertise includes investment management, product development and risk models. He has advised multiple due diligence teams on risk assessment in banking and insurance sectors, set up FX and commodity hedging desks, built fair value models for illiquid securities for FAS 157 disclosures, helped a 3 billion US$ dollar life insurance fund on allocation and bid patterns for 20 and 30 year bonds, ALM mismatch and fixed income strategy.

He has worked with the securities and banking regulator and the Asian Development Bank on assessing the state of the corporate bond market as well as issued valuation opinions on cross currency swaps, participating forwards and contingent liabilities for Exchange Guarantee Funds in the region.

Jawwad is a Fellow Society of Actuaries (Schaumburg, IL), holds an MBA from Columbia Business School and is a computer science graduate (NUCES FAST). He is an adjunct Faculty member at the SP Jain Global School of Management in Dubai and Singapore where he teaches Risk Management, Derivative Pricing, Project Finance and Entrepreneurship.

PART I: RISK
1. What is Risk?
2. Measuring Risk
3. Stress Testing, Bank Regulations and Risk
4. Managing Risks
5. Building Risk Systems
PART II: MONTE CARLO SIMULATION
6. Monte Carlo Simulators in Excel
7. Simulation Applications
PART III: FIXED INCOME AND COMMODITY MARKETS - DISSECTING PRICING
8. Identifying Drivers for Projecting Crude Oil Prices
9. Gold and the Australian Dollar
10. Relative Value and the Gold - Silver Ratio
11. Correlations: Crude Oil and Other Commodities
12. Crude Palm Oil Futures
13. Crude Oil and Inflation
14. Historical Spreads in Bond Yealds in the Indo-Pak Sub-Continent
15. Volatility Trends in Commodity Prices
16. Energy Insights
PART IV: DERIVATIVE SECURITIES 
17. Derivatives Terminology
18. Products and Pricing
19. Variations
20. Derivative Pricing
21. Advanced Fixed Income Securities
22. The Treasury Function
23. Advanced Products 

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