Risk: The New Management Imperative in Finance
Ward, Harry, Modern Trader
Risk: The New Management Imperative in Finance By James T. Gleason Bloomberg Press (2000) $29.95, 245 pages
Reviewed by Harry Ward
This book on financial risk models was written for those without a Ph.D. in mathematics and a bent for dissecting mathematical algorithms. Consider this a compliment to the author, whose intent is not to dazzle readers with equations and technical jargon, but rather to give a clear understanding of the importance of risk management. Gleason uses plain English to explain the latest techniques of measuring and managing risk and the importance to corporations of constructing a global risk management system.
Senior managers will gain understanding of how returns on capital can be maximized within a risk management framework. Traders, too, can benefit from insights into the sometimes seemingly arbitrary process by which constraints are placed on their trading.
True students of financial markets will find the book's first half divided into two sections, a tooremedial and somewhat boring review of the risk faced by global operations and how these risks are hedged with futures, swaps and options. The chapters covering commodities, currencies, fixedincome and equities are somewhat pedestrian and provide only a textbook review of the risks involved.
The second half of the book explores credit and portfolio risk. The models for risk and portfolio management, like marked-to-market plus, Monte Carlo simulation, Value at Risk, (VaR), parametric VaR and other techniques, are explained with descriptions of their strengths and weaknesses. …