Advanced Financial Risk Management: Tools and Techniques for Integrated Credit Risk and Interest Rate Risk Management 2nd Edition

If you haven't read Advanced Financial Risk Management (2nd edition), your career in finance is at risk. This book teaches risk management at the highest levels. Although the preliminary chapters make brief detours through the basics of fixed-income pricing, the heart of this book focuses on developing a toolkit for measuring the market's consensus about future interest rates, quantifying the risk of numerous advanced instruments through bushy-tree and other models, and managing the risk of a credit portfolio. The authors emphasize interest rate realism, the integration of "big data" default probabilities, and quantitative metrics of market opinion throughout. Legacy techniques for interest rate modeling and credit risk are thoroughly debunked. Instead, the authors teach us how to build the best available models without making the mathematics any more painful than necessary. The discussion of how to model the complex twists in the yield curve is among the strongest in a very strong book. AFRM captures a generational change in the understanding of risk management. Individuals and institutions who can adapt the powerful techniques discussed by van Deventer and colleagues to their own trading and credit portfolios will be able to compete in modern financial markets. Conversely, market participants who cling to outdated legacy techniques may be able to survive while times are flush but will probably come to grief at the next downturn. I strongly recommend this book to all who have a serious interest in cutting-edge finance.