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Thursday, June 6, 2013

Market Risk Analysis, Practical Financial Econometrics 2nd edition, Carol Alexander



Consistent with the title, the second volume in Ms. Alexander's series covers common and practical econometric models. This is a great desk reference when you are out of practice or like in my case moving from a more segmented line of business back to a broader portfolio. I have the entire series of four and I refer to this volume and the fourth volume (VaR) quite frequently. While I still have a copy of Baltagi on my desk, Alexander's book truly is more practical because the examples are contemporary.

practical financial econometrics is a very useful book for all connected with the field of finance.

It is a real treasure. The description in the book is very practical. It successfully addresses and accommodates the issues that researcher encounters.

The efforts of the author for crafting such a master piece is highly appreciable.The book offers much more via discussion forum as well. It is really wonderful and creative idea to remain connected with the world's greatest authority in the field of risk management through the websites. I think these website have been adding the life in the book and make it an alive entity.

Like her previous book "Market Models", this book is very well written, clearly explained, and very complete. I like her style of writing because it's precise, intuitive, and goes straight to the point. Carol Alexander is a seasoned professional, and that is certainly reflected in this book. I like it a lot and recommend it highly.

This book is a "must have" for financial analysts. Carol Alexander is one of the best technical finance writers around, and has the ability to convey complex concepts in a way that practitioners can understand.

I particularly like the chapters on GARCH and copulas. She includes loads of examples that bring the subject matter to life.

Carol writes both cogently and accessibly on financial mathematics here, covering a very broad area of topics in an easily intelligible manner - a welcome break from some of the drier mathematical texts. It definitely merits space on your desk if you're a practitioner or student - however small your desk is!

Just one hint, from somebody who learned a lot from Carol - if somebody with her experience decides to invest 5 years in sharing their understanding of the world of finance, I wouldn't miss the chance to read it! The scope of the book is unparalleled, and it doesn't come at the expense of thoroughness and clarity. And what you wouldn't get from four other books on those topics, is a unified, consolidated, approach to analysing and understanding areas which traditionally have been seen in isolation. I don't need to mention what difference it makes in practice, once you have the details, to be able to take one step back and see the bigger picture.

Professor Alexander has continued the excellent benchmark standard she first set with "Market Models" some years ago with this comprehensive 4-volume set, which should be on the desk of every investment banker and structured finance practitioner. One expects a thorough grounding in the subject with her books, this volume carries on the tradition but also blends in the theory with implementation. It also covers latest developments in structured credit...as someone who has structured and closed CDO, RMBS, N-PL ABS and ABCP deals myself (both cash and synthetic) I found the treatment of credit to be very worthwhile and high quality, well worth getting for that part of the volume alone. The placing of all related topics into one handsome set is also useful, as all material is gathered in one place.

It is always gratifying to see someone who set high standards with his/her first book surpass them with later works...with this volume, Professor Alexander has written (for now!) the last word in financial market risk management. Highly recommended to practitioners and graduate students alike.

Alexander's style is well-suited to this vast topic, where she efficiently distills the material down to the fundamentals before giving various examples. To paraphrase Einstein, Alexander makes it "as simple as possible, but no simpler". Both as a student and now as a financial practitioner I appreciate when books don't waste my time.

This volume covers many topics in common with other texts - equity factor models and GARCH for example - but this is the best treatment I've seen, and Alexander's wealth of experience shines in the sections on forecasting and model evaluation. The accompanying CD opens up an additional level of interaction if you're willing to sit at your computer while studying, but the manageable format makes each of the four volumes of "Market Risk Analysis" quite portable. All four books are exceptionally well indexed and divided into meaningful sections for either study or reference, the notation is clear and consistent, the diagrams helpful and the worked examples are clear without being verbose.

I would recommend that anyone with a specific application in mind buy at least the first volume, which establishes the foundation maths and notation, along with one or more of the latter volumes. Students, or anyone interested in covering additional ground, will benefit from the whole set as one of the definitive reference works in this fascinating but rapidly evolving field.

We certainly need more accurate financial analysis. The recent bad news in the US financial markets is in part due to the inaccuracies in existing financial models that were used by Wall Street firms to value complex financial instruments.

The book explains many of these instruments. Especially the derivative securities like CDOs, where underlying primary products like mortgages were aggregated and the resultant cash flows then divvied up into multiple tranches. Each tranche having different yield and risk. So if you want to get beyond the headlines, the text gives an education into what all this means.

But with the benefit of a little hindsight, look carefully at how the book describes the risk models that were used to "understand" the instruments. In the real world, the assumptions of several failed and are failing dramatically.

Product Details :
Hardcover: 426 pages
Publisher: Wiley; Volume II edition (May 27, 2008)
Language: English
ISBN-10: 0470998016
ISBN-13: 978-0470998014
Product Dimensions: 6.9 x 1.2 x 9.9 inches

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