Additional Readings for FRM
Cases
· Case Study - Rand Merchant Bank
· Risk management at PIMCO. Description of measurement and management of fixed-income risks.
· Kuprianov, 1995, Case studies of large losses in derivative markets. Metallgesellschaft and Barings.
· Digenan et al., 1995, Metallgesellschaft AG: A Case Study.
· Krapels, 2001, Re-examining the Metallgesellschaft Affair and its Implication for Oil Traders.
· Orange County case by Philippe Jorion
· Jorion, 2000, Risk management lessons from Long-Term Capital Management, European Financial Management 6, 277-300. Analysis of LTCM failure.
· Coy and Woolley, Failed wizards of Wall street, 1998, Business Week. Discussion of strategies pursued by LTCM and other arbitrageurs.
Surveys
· West, 2004, Risk measurement for financial institutions. General survey.
· Alexander, 2003, The present and future of financial risk management, ISMA Center Discussion Papers in Finance 2003-12. The first part of the paper discusses the recent trends in risk management.
Market risk
· Berkowitz and O’Brien, 2002, How accurate are Value-at-Risk models at commercial banks? Journal of Finance 57(3), 1093-1111. Backtesting of VaR, comparison with GARCH.
· Christoffersen and Diebold, 1999, How relevant is volatility forecasting for financial risk management. Model-free procedure for assessing volatility forecastability across different horizons.
· Ahmed, 2001, Forecasting correlation among equity mutual funds, Journal of Banking and Finance 25, 1187-1208. Good survey of different methods to estimate future correlations.
· Hawkins, 1997, Risk analysis techniques, GARP FRM exam review class notes. Survey of VaR methods, including sample exam questions and answers.
Liquidity risk
· Bekaert, Harvey, and Lundblad, 2003, Liquidity and expected returns: lessons from emerging markets.
Credit risk
· Bharath and Shumway, 2004, Forecasting Default with the KMV-Merton Model. Comparing the default forecasting quality of the KMV model with a simpler approach.
· Vassalou and Xing, 2004, Default Risk in Equity Returns, Journal of Finance 59(2), 831-868. Studying relation between default risk and other (e.g, size and book-to-market) equity risks.
Additional sources
o RiskMetrics technical document (1996), evolution of a standard (its update, 1999), and practical guide (1999)
o CreditGrades technical document (description of the structural model, 2002), CreditMetrics technical document (1997)
· Moody’s KMV white papers on credit risk
· Risk management links on the web
· Articles on credit risk from Tavakoli Structured Finance