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Sekerke, Matt

Bayesian Risk Management: A Guide to Model Risk and Sequential Learning in Financial Markets

Sekerke, Matt - Bayesian Risk Management: A Guide to Model Risk and Sequential Learning in Financial Markets, ebook

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ISBN: 9781118747506
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A risk measurement and management framework that takes model risk seriously

Most financial risk models assume the future will look like the past, but effective risk management depends on identifying fundamental changes in the marketplace as they occur. Bayesian Risk Management details a more flexible approach to risk management, and provides tools to measure financial risk in a dynamic market environment. This book opens discussion about uncertainty in model parameters, model specifications, and model-driven forecasts in a way that standard statistical risk measurement does not. And unlike current machine learning-based methods, the framework presented here allows you to measure risk in a fully-Bayesian setting without losing the structure afforded by parametric risk and asset-pricing models.

  • Recognize the assumptions embodied in classical statistics
  • Quantify model risk along multiple dimensions without backtesting
  • Model time series without assuming stationarity
  • Estimate state-space time series models online with simulation methods
  • Uncover uncertainty in workhorse risk and asset-pricing models
  • Embed Bayesian thinking about risk within a complex organization

Ignoring uncertainty in risk modeling creates an illusion of mastery and fosters erroneous decision-making. Firms who ignore the many dimensions of model risk measure too little risk, and end up taking on too much. Bayesian Risk Management provides a roadmap to better risk management through more circumspect measurement, with comprehensive treatment of model uncertainty.

Keywords: Bayesian Risk Management: A Guide to Model Risk and Sequential Learning in Financial Markets, Matt Sekerke, Bayesian probability, time series econometrics, financial econometrics, risk measurement, risk modeling, model risk, risk governance, parameter uncertainty, forecasting, stochastic processes, operational risk, asset management, asset pricing, derivative pricing, Bayesian Risk Management: A Guide to Model Risk and Sequential Learning in Financial Markets, Matt Sekerke, Bayesian probability, time series econometrics, financial econometrics, risk measurement, risk modeling, model risk, risk governance, parameter uncertainty, forecasting, stochastic processes, operational risk, asset management, asset pricing, derivative pricing, Risk, Contingency & Crisis Management

Author(s)
Publisher
John Wiley and Sons, Inc.
Publication year
2015
Language
en
Edition
1
Series
Wiley Finance
Page amount
240 pages
Category
Economy
Format
Ebook
eISBN (ePUB)
9781118747506
Printed ISBN
9781118708606

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