Model uncertainty must be accepted as an intrinsic part of risk measurement. This insight is the starting point for Rethinking Risk Measurement and Reporting, which identifies how uncertainty of risk figures can be better understood and expressed and how expert judgement can be absorbed into the fabric of modern risk management. Edited by Klaus Bocker and published in two volumes, Rethinking Risk Measurement and Reporting, will raise the reader's awareness of model and parameter uncertainty when using mathematical models in financial risk management. This second volume is divided into three sections and discusses a broad spectrum of financial applications, with practical examples, by risk type. Volume II builds on the foundations of the first volume, providing a higher degree and intensity of technical content. Tools and techniques are divided by their application for: Market Risk Credit Risk Operational Risk Klaus Bocker has assembled leading practitioners and academics within risk management fraternity to provide a comprehensive and integrated approach for improving existing risk measurement, management and reporting.
Klaus Bocker Klaus Bocker works as a senior risk controller in UniCredit Group and is the team head of Risk Analytics and Methods. In this capacity, one of his primary responsibilities is overseeing all quantitative aspects of UniCredit Group's economic capital model, in particular business risk, real-estate risk, financial investment risk and risk aggregation. Klaus is also a research fellow at the Center for Mathematical Sciences at the Technische Universitat Munchen. He is conducting research in various fields of finance where he has authored and co-authored several articles that have been published in various recognized finance and mathematical journals. Klaus is also a frequent speaker at international risk conferences and at seminars about risk management and quantitative finance. In 2007, 2008 and 2010, he won the PRMIA Institute's Award for New Frontiers in Risk Management related to his research activities. In August 2007, Klaus was inducted by his peers as a charter member of the international Risk Who's Who honor society. He holds a degree in Theoretical Physics and a PhD in Mathematics from the Technische Universitat Munchen.
About the Editor About the Authors Introduction PART I MARKET RISK AND FINANCIAL TIME SERIES 1 Efficient Bayesian Estimation and Combination of Garch-Type Models David Ardia; Lennart F. Hoogerheide aeris CAPITALAG Switzerland; Erasmus University Rotterdam 2 Bayesian Inference for Stochastic Volatility Modelling Hedibert F. Lopes, Nicholas G. Polson The University of Chicago Booth School of Business 3 Bayesian Prediction of Risk Measurements Using Copulas Maria Concepcion Ausin; Hedibert Freitas Lopes Universidad Carlos III de Madrid; University of Chicago Booth School of Business 4 Bayesian Inference for Hedge Funds with Stable Distribution of Returns Biliana Guner; Svetlozar T. Rachev; Daniel Edelman; Frank J. Fabozzi Yeditepe University; FinAnalytica; UBS Alternative and Quantitative Investments LLC; Yale School of Management 5 Model Uncertainty and Its Impact on Derivative Pricing Alok Gupta, Christoph Reisinger, Alan Whitley University of Oxford PART II CREDIT RISK 6 Predictions Based on Certain Uncertainties: A Bayesian Credit Portfolio Approach Christoff Gossl UniCredit 7 Uncertainty in Credit Risk Parameters and Its Implication on Risk Figures Christina R. Bender; Ludger Overbeck d-fine GmbH; University of Giessen 8 Lessons from the Crisis in Mortgage-Backed Structured Securities: Where Did Credit Ratings Go Wrong? Erik Heitfield Federal Reserve Board 9 Rethinking Credit Risk Modelling Christian Bluhm; Christoph Wagner Technische Universitat Munchen; Allianz Risk Transfer 10 The Bayesian Approach to Default Risk: A Guide Michael Jacobs Jr; Nicholas M. Kiefer US Department of the Treasury, Office of the Comptroller of the Currency; Cornell University 11 Bayesian Modelling of Small and Medium-Sized Companies' Defaults Mathilde Wilhelmsen, Xeni K. Dimakos; Tore Anders Husebo, Marit Fiskaaen Norwegian Computing Center; Centre of Excellence Credit Risk Modelling, Sparebank 1 PART III OPERATIONAL RISK 12 Measuring Operational Risk in a Bayesian Framework Luciana Dalla Valle University of Milan 13 Operational Risk: Combining Internal Data, External Data and Expert Opinions Pavel V. Shevchenko; Mario V. Wuthrich CSIRO Mathematics, Informatics and Statistics; RiskLab ETH Zurich 14 Bayesian Estimation of Levy Copulas for Multivariate Operational Risks Philipp Gebhard, Gernot Muller; Klaus Bocker Technische Universitat Munchen; UniCredit Group