For undergraduate or graduate courses with titles such as "Risk Management" and "Financial Risk Management" and courses on Financial Institutions focusing on regulation and risk management. Written by a respected author in the professional market, Risk Management and Financial Institutions, 2/e is the only text that explains risk management theory in a "this is how you do it" manner, encouraging practical application in today's world. Professors need a text that offers the latest information available, yet is written for application in a real work environment. Hull helps students gain knowledge that will stay with them beyond college. Thoroughly updated, the Second Edition incorporates new information regarding Stress Testing, liquidity risks, ABSs, CDOs, and the credit crunch of 2007.

Table of Contents

Business Snapshots Preface 1. Introduction 2. Banks 3. Insurance 4. Mutual Funds and Hedge Funds 5. Financial Instruments 6. How Traders Manage Their Exposures 7. Interest Rate Risk 8. Value at Risk 9. Volatility 10. Correlation and Copulas 11. Regulation, Basel II, and Solvency II 12. Market Risk VaR: Historical Simulation Approach 13. Market Risk VaR: Model-Building Approach 14. Credit Risk: Estimating Default Probabilities 15. Credit Risk Losses and Credit VaR 16. ABSs, CDOs, and the Credit Crunch of 2007 17. Scenario Analysis and Stress Testing 18. Operational Risk 19. Liquidity Risk 20. Model Risk 21. Economic Capital and RAROC 22. Risk Management Mistakes to avoid Appendix A: Compounding Frequencies and Interest Rates Appendix B: Zero Rtes, Forward Rates, and Zero-Coupon Yield Curves Appendix C: Valuing Forward and Futures Contracts Appendix D: Valuing Swaps Appendix E: Valuing European Options Appendix F: Valuing American Options Appendix G: Taylor Series Expansions Appendix H: Eigenvectors and Eigenvalues Appendix I: Principal Components Analysis Appendix J: Manipulation of Credit Transition Matrices Answers to Questions and Problems Glossary of Terms DerivaGem Software Tables For N(x) Index