FINANCIAL MARKET RISK
Measurement and Analysis
(2nd Edition)
by Cornelis A Los (Claremont Graduate University, USA)
What is financial market risk? How is it measured and analyzed, and how should it be measured and analyzed? Are all financial market risks dangerous? Is market risk equivalent to the “energy of the markets”? Why can risk be seen as an opportunity for the speculator and as insurable by the hedger? Which risk can be hedged and which cannot? Do markets exhibit different degrees of persistence and, therefore, of risk? If so, do these different degrees of persistence give rise to risk arbitrage opportunities? These questions, and many more, are answered in this comprehensive volume.
This important book challenges the conventional, prevailing statistical ergodicity paradigm of global financial market risk analysis, which maintains, inter alia, that financial market information (”news event”) processes are market-neutral. As such, it will be of great interest to students, academics and researchers in the fields of financial engineering, asset management and financial risk management. It will particularly appeal to professionals in international banking institutions and in the global pension and insurance fund business, who deal with interlinking financial markets with various degrees of persistence.
This updated second edition includes new chapters on the measurement of changes in persistence around market crashes; comparing increasing pre-crash persistence to post-crash neutrality; new examples of wavelet multi-resolution analysis of the term structures in the US and in Japan; the difficulties experienced with simulating empirically observed anti-persistence and turbulence; potential arbitrage opportunities between financial markets with different degrees of persistence; and the proper valuation of non-traded executive options.
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