Managing derivatives risk: establishing internal systems and controls
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Chicago u.a.
Irwin
1995
|
| Schlagworte: | |
| Online-Zugang: | Inhaltsverzeichnis |
| Beschreibung: | XXXVII, 406 S. graph. Darst. |
| ISBN: | 1557387788 |
Internformat
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| adam_text | Table of Contents
Preface xiii
Acknowledgments xvii
Abbreviations xxxv
PART ONE
COMPONENTS OF A RISK MANAGEMENT POLICY 1
Chapter 1
Financial Instruments and Risk Management Systems 3
1. Introduction 3
2. Classical and Exotic Derivative Instruments 4
3. The Personalization of Financial Products—
Opportunities and Risks 7
4. An Industry in Rapid Evolution 9
5. Real Versus Virtual Assets 12
6. Stopping the Flow of Red Ink 14
7. Is Management in Control of Derivatives Trades? 16
8. A Sound Procedure for Risk Management 19
9. Accounting for Past Due and Sour Derivatives 22
Chapter 2
Understanding the Notional Principal Amount and Us Metrics 25
1. Introduction 25
2. The Changing Aspects of Notional Principal 26
3. Examining Contrarian Approaches to Risk Tolerance 29
4. A Demodulator for Estimating Risk Based on
Notional Principal 31
V
vi Table of Contents
5. Converting the Notional Amount to Loans Equivalent 33
6. Using Military Standards to Gauge Derivatives
Exposure 35
7. Arguments Favorable to Risk Conversion 38
8. Going Beyond Risk Equivalence 40
Chapter 3
Estimating Fair Value by Marking to Market or
Marking to Model 45
1. Introduction 45
2. Why Is It Important to Estimate Fair Value? 46
3. Marking to Market for Better Risk Management 48
4. Analogical Reasoning and the Art of Marking to Model 51
5. Highlighting the Role of Parametric Modeling 53
6. Why an Object Oriented Solution Is the Better
Alternative 55
7. Shortcomings of Methods of Estimating Fair Value 57
8. Exploiting the Potential Fair Value Offers 59
9. Fair Value Estimates Must Be Commensurate to the
Amount of Exposure 62
Chapter 4
Capitalizing on Cash Flow and Liquidity 65
1. Introduction 65
2. Advisable Practices in Connection to Cash Flow 66
3. Looking at Cash Flow from a Financial
Statement Viewpoint 69
4. Results Provided Through Multidimensional Analysis 72
5. Attributes of a Qualitative Evaluation of Cash Flow 74
6. Comparison of Cash Flow, Duration, and
Effective Duration 76
7. Paying Attention to the Fundamentals of Liquidity 78
8. Aspects of Liquidity 80
9. Cash Liquidity, Funding Risk, and Derivatives
Acid Test 83
Chapter 5
Aspects of Legal Risk and Possible Aftermaths 87
1. Introduction 87
2. Legal Issues with Cross Border Financial Trades 88
Table of Contents vii
3. Polyvalent Nature and Uncertainty of
Legal Aspects 90
4. Is There Immunity from Legal Risk? 92
5. CEOs Can Never Be Too Careful 94
6. Paying Attention to Issues of Personal Responsibility 96
7. The Laws, the Lawyers, and the Legislators 98
8. Taking Account of the Law and Legal Decisions 100
9. Can the Gooda Walker Lloyd s Ruling Create
a Precedent? 102
10. Legal Issues, Country Risk, and Off Balance
Sheet Instruments 104
Chapter 6
Payments, Clearing, and Settlement Risk 107
1. Introduction 107
2. National and Cross Border Payments 108
3. The Need for Fast Response to Cross Border
Money Flows 110
4. The Increasing Correlation of Cross Border Markets 111
5. The Critical Case of Intraday Payments 114
6. Using Risk Pricing to Swamp Intraday Exposure 116
7. Clearinghouses and the Concept of Margins 117
8. Commodities and Futures Exchanges 119
9. Electronic Trading Technology at Exchanges
and Member Firms 121
10. ECHO: A Case Study of Failure 123
PART TWO
CONTROL OF EXPOSURE AS PART OF THE
STRATEGIC PLAN 127
Chapter 7
Strategic Plans by Financial Institutions, Risk, and
Market Opportunity 129
1. Introduction 129
2. What Is the Real Reason for Forecasting? 130
3. Strategic Plans and Structural Prerequisites 132
4. Capitalizing on the Many Aspects of Strategic
Planning 134
viii Table of Contents
5. Banking Plans, Globalization, and the Changing
Financial Industry 137
6. Can We Develop and Sustain a Winning Strategy? 141
7. Elaborating a Banking Strategy That Emphasizes
the Client 142
8. Information Technology and the Redefinition of
Financial Intermediation 144
9. What s Behind the Concept of Wealth Cards? 146
10. A Strategy for Dealing in Derivative Financial
Instruments 147
Chapter 8
Control of Risk by Banks, Nonbanks, and Treasury Operations 151
1. Introduction 151
2. The Concept of Risk and Its Management 152
3. Risk Management as a Philosophy of Banking 155
4. Risks Associated with Investments and Credits 158
5. How Can the Financial System Face the Challenge
of Added Leverage? 160
6. Running the Treasury for Profits and Its Risks 162
7. The Cultural Evolution Among Company Treasurers 164
8. Can External Advisors Help? 166
9. New Perspectives for Risk Management 168
10. The Special Case of the Offshores 170
Chapter 9
Derivatives Financing versus Debt or Equity financing 173
1. Introduction 173
2. Prevailing Forms of Financing 174
3. Company Stocks and Financing Through Equity 176
4. Can Value Investing Determine the Fair Value
of Stock? 178
5. Profit and Loss with Equity Derivatives 180
6. Using Commercial Paper and Disintermediation 183
7. How Investors Get Trapped with High High
Bonds and LYONs 184
8. The Great Variety in the Securitization of Mortgages 185
9. Virtual Financial Products Are All over the Market 188
10. The Popularization of Financial Software 189
Table of Contents ix
Chapter 10
Synthetics and Exotic Derivatives 191
1. Introduction 191
2. Synthetic Positions: An Example with Currencies 192
3. Synthetic Long/Short Option 193
4. Hedging with Spreads and Synthetics 196
5. Straddles 199
6. Strangles: One Step Further in Complexity 200
7. Capitalizing on Contango and Backwardation 203
8. Setting the Stage for a Backwardation Swap 204
9. Embedded Options 208
10. Guaranteed Bonds and Other Risky Derivatives 210
Chapter 11
Hedging through the Exploitation of Market Inefficiencies
and the Emerging Markets 213
1. Introduction 213
2. Goals and Procedures for Hedging Policies 215
3. Hedging, Speculation, and Price Differentials 217
4. Dynamic Solutions and Wrapped Hedges 219
5. Is There Profit in Exploiting Market Inefficiencies? 222
6. Capitalizing on Market Inefficiency 224
7. Investment Uncertainties and the Efficiency Frontier 226
8. An Efficiency Frontier in Diversification Strategies 229
9. Examining Investment Trends in Emerging Markets 232
Chapter 12
Securities Lending: How to Precipitate a Banking Crisis 237
1. Introduction 237
2. Bubbles, Bursts, and Panics—A Common
Denominator 238
3. Strategies for Growth and Tulip Type Bubbles 241
4. Speculation, False Information, and King George I 244
5. The Art of Securities Lending and Borrowing 246
6. Repurchase Agreements and Gaping Holes 250
7. Can You Spare Someone Else s Assets for a Repo? 252
8. A Mortgage Roll Arbitrage Model for Repos 255
9. How the Regulators Look at Securities Lending 257
10. Delivery Versus Payment 258
x Table of Contents
PART THREE
RIGOROUS MODELS AND STRATEGIES FOR
DERIVATIVES RISK MANAGEMENT 263
Chapter 13
Using Return on Risk Capital to Control Exposure and
Keep Ahead of Competition 265
1. Introduction 265
2. The Billions of Dollars Lost with Derivatives 267
3. A Thorough Procedural Infrastructure for
Efficient Risk Management 270
4. Measuring Risks and Rewards Through Risk Capital 274
5. Using Fuzzy Engineering to Establish the
Basis of an Insurance Premium 278
6. Risk Related Results and Return on Risk Capital 281
7. Using the Concepts of Margins and Insurance
Premiums with Securities Lending 284
8. Applying Risk Premiums with Default Risk 286
9. RORC and Necessary Organizational
Decisions on Default Risk 291
10. Maintaining and Enhancing the Quality of
Banking Services 294
Chapter 74
Rocket Science and the New Metrics for the Control of Risk 297
1. Introduction 297
2. Rocket Science Looks at Risk Management 298
3. Risk Management, the Weibull Distribution and the
Chorafas Algorithm 301
4. Yield Curves Versus Missile Trajectory Curves 305
5. Handling Systematic and Specific or
Unsystematic Risk 307
6. Toward a Redefinition of Capital Requirements for
Banks and Nonbanks 309
7. The Work Rocket Scientists Can Do with
Central Banks 312
8. Evaluating a Proposal on Capital Adequacy by the
Group of Thirty 315
9. Is There Substance in Netting and Offsetting? 317
10. Hedge Ratios, Duration, and Macaulay s Model 319
11. Calculating and Using the Volatility Factor Beta 321
Table of Contents xi
Chapter 15
Using Delta, Gamma, Theta, Kappa, and Rho for Better
Risk Management 325
1. Introduction 325
2. Analytical Finance, Heuristics, and Technology 326
3. Training, Trading, Financial Analysts, and
Rocket Scientists 328
4. Using Mathematical Models for Optimization 331
5. Delta and Delta Hedges 333
6. Gamma and Gamma Hedges 336
7. Theta, Kappa, Rho, and Their Usage 337
8. Learning to Use Differentiation and Integration 339
9. Taking Care of Kurtosis in a Risk and Return
Distribution 341
10. Exploiting the Notion of Intrinsic Time 344
Chapter 16
Creating a Culture for Risk Evaluation and Control 347
1. Introduction 347
2. Risk Policies and the Procedures to Support Them 348
3. Targeting the Entire Array of Risks 351
4. Reporting Practices for a Risk Sensitive Culture 353
5. Choosing and Using Option Pricing Models 356
6. Lognormal Distributions and Transition Probabilities 358
7. Applying the Diffusion Process to the Financial
Markets 361
8. What Is the Level of Confidence We Wish to Apply? 365
9. Practical Use of Weiner s z Risk Factor in Connection
to Notional Principal 368
10. Integrating the Tools Provided by Analytical
Computational Finance 372
Chapter 17
Strategic Decisions in Technology for Greater
Professional Clout 375
1. Introduction 375
2. High Technology and Lifelong Learning 376
3. Choosing What to Know Is an Act of Intelligence 378
4. The Pillars of Advanced Solutions Are Research and
Learning 381
5. Strategic Issues in Prototyping Managerial Problems 383
xii Table of Contents
6. The Need for Polyvalent Database Support 385
7. Capitalizing on Hard Data and Soft Data 388
8. Queries, Transaction, and Technical Prerequisites 391
9. Rethinking the Nature of Technological Support 394
10. Conclusion 395
Index 397
|
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| spelling | Chorafas, Dimitris N. 1926-2014 Verfasser (DE-588)107941961 aut Managing derivatives risk establishing internal systems and controls Dimitris N. Chorafas Chicago u.a. Irwin 1995 XXXVII, 406 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Beleggingen gtt Risk management gtt Derivative securities Risk management Risikomanagement (DE-588)4121590-4 gnd rswk-swf Derivat Wertpapier (DE-588)4381572-8 gnd rswk-swf Derivat Wertpapier (DE-588)4381572-8 s Risikomanagement (DE-588)4121590-4 s DE-604 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=007045721&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Chorafas, Dimitris N. 1926-2014 Managing derivatives risk establishing internal systems and controls Beleggingen gtt Risk management gtt Derivative securities Risk management Risikomanagement (DE-588)4121590-4 gnd Derivat Wertpapier (DE-588)4381572-8 gnd |
| subject_GND | (DE-588)4121590-4 (DE-588)4381572-8 |
| title | Managing derivatives risk establishing internal systems and controls |
| title_auth | Managing derivatives risk establishing internal systems and controls |
| title_exact_search | Managing derivatives risk establishing internal systems and controls |
| title_full | Managing derivatives risk establishing internal systems and controls Dimitris N. Chorafas |
| title_fullStr | Managing derivatives risk establishing internal systems and controls Dimitris N. Chorafas |
| title_full_unstemmed | Managing derivatives risk establishing internal systems and controls Dimitris N. Chorafas |
| title_short | Managing derivatives risk |
| title_sort | managing derivatives risk establishing internal systems and controls |
| title_sub | establishing internal systems and controls |
| topic | Beleggingen gtt Risk management gtt Derivative securities Risk management Risikomanagement (DE-588)4121590-4 gnd Derivat Wertpapier (DE-588)4381572-8 gnd |
| topic_facet | Beleggingen Risk management Derivative securities Risikomanagement Derivat Wertpapier |
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