Risk Management in Banking SECOND EDITION

This new edition has been fully revised and updated to reflect new developments in the field, the latest research, and the changing emphasis in current practice. It considers all aspects of risk management, a vital topic within the banking industry, including: asset liability management, risk-based capital, value at risk, loan portfolio management, credit risk, market risk, interest rate risk, liquidity risk, fund transfer pricing, and capital allocation.

This greatly expanded new edition of Joël Bessis' seminal work Risk Management in Banking has been comprehensively revised and updated to take into account the changing face of risk management. Extensive new material has been included to reflect new developments in the field and to broaden the scope of the work.

Risk Management in Banking Second Edition examines all aspects of financial risk management in banking, from global considerations right down to the fundamental aspects of the management of a particular profit centre. The author emphasizes the need to understand conceptual and implementation issues of risk management and examines the latest techniques and practical issues, including:
* Value at Risk (VaR)

* Asset Liability Management (ALM)

* Credit Risk

* Interest Rate Risk (IRR)

* Funds Transfer Pricing

* Credit Derivatives

* Market Portfolio Risk

* Capital Management

* Loan Portfolio Models
Building on the already considerable success of this classic work, the second edition is an indispensable text for MBA students, practitioners in banking and financial services, bank regulators and auditors.

1. Banking Risks

Banking Business Lines

Banking Risks

2. Risk Regulations

Banking Regulations

3. Risk Management Processes

Risk Management Processes

Risk Management Organization

4. Risk Models

Risk Measures

VaR and Capital

Valuation

Risk Model Building Blocks

5. Asset–Liability Management

ALM Overview

Liquidity Gaps

The Term Structure of Interest Rates

Interest Rate Gaps

Hedging and Derivatives

6. Asset–Liability Management Models

Overview of ALM Models

Hedging Issues

ALM Simulations

ALM and Business Risk

ALM 'Risk and Return' Reporting and Policy

7. Options and Convexity Risk in Banking

Implicit Options Risk

The Value of Implicit Options

8. Mark–to–Market Management in Banking

Market Value and NPV of the Balance Sheet

NPV and Interest Rate Risk

NPV and Convexity Risks

NPV Distribution and VaR

9. Funds Transfer Pricing

FTP Systems

Economic Transfer Prices

10. Portfolio Analysis: Correlations

Correlations and Portfolio Effects

11. Market Risk

Market Risk Building Blocks

Standalone Market Risk

Modelling Correlations and Multi–factor Models for Market Risk

Portfolio Market Risk

12. Credit Risk Models

Overview of Credit Risk Models

13. Credit Risk: 'Standalone Risk'

Credit Risk Drivers

Rating Systems

Credit Risk: Historical Data

Statistical and Econometric Models of Credit Risk

The Option Approach to Defaults and Migrations

Credit Risk Exposure

From Guarantees to Structures

Modelling Recoveries

Credit Risk Valuaiton and Credit Spreads

Standalone Credit Risk Distributions

14. Credit Risk: 'Portfolio Risk'

Modelling Credit Risk Correlations

Generating Loss Distributions: Overview

Portfolio Loss Distriburtions: Example

Analytical Loss Distributions

Loss Distributions: Monte Carlo Simulations

Loss Distribution and Transition Matrices

Capital and Credit Risk VaR

16. Capital Allocation

Capital Allocation and Risk Contributions

Marginal Risk Contributions

16. Risk–adjusted Performance

Risk–adjusted Performance

Risk–adjusted Performance Implementation

17. Portfolio and Capital Management (Credit Risk)

Portfolio Reporting (1)

Portfolio Reporting (2)

Portfolio Applications

Credit Derivatives: Definitions

Applications of Credit Derivatives

Securitization and Capital Management

Bibliography

Index

JOEL BESSIS is in charge of risk analytics at the risk department of CDC IXIS, in Paris, France and was previously Director of Research at Fitch. He is Professor of Finance at HEC School of Management, Paris, France, and a frequent speaker at professional conferences. He has been a consultant to risk departments of several banking institutions in Europe, and held a permanent consultancy position for seven years at Banque Paribas in the Risk Department.

This book examines all aspects of financial risk management in banking, from global considerations right down to the fundamental aspects of the management of a particular profit centre.