Known, the Unknown, and the Unknowable in Financial Risk Management: Measurement and Theory Advancing Practice

A clear understanding of what we know, don't know, and can't know should guide any reasonable approach to managing financial risk, yet the most widely used measure in finance today--Value at Risk, or VaR--reduces these risks to a single number, creating a false sense of security among risk managers, executives, and regulators. This book introduces a more realistic and holistic framework called
nown, the
nknown, and the
nknowable--that enables one to conceptualize the different kinds of financial risks and design effective strategies for managing them. Bringing together contributions by leaders in finance and economics, this book pushes toward robustifying policies, portfolios, contracts, and organizations to a wide variety of
risks. Along the way, the strengths and "limitations" of "quantitative" risk management are revealed.

In addition to the editors, the contributors are Ashok Bardhan, Dan Borge, Charles N. Bralver, Riccardo Colacito, Robert H. Edelstein, Robert F. Engle, Charles A. E. Goodhart, Clive W. J. Granger, Paul R. Kleindorfer, Donald L. Kohn, Howard Kunreuther, Andrew Kuritzkes, Robert H. Litzenberger, Benoit B. Mandelbrot, David M. Modest, Alex Muermann, Mark V. Pauly, Til Schuermann, Kenneth E. Scott, Nassim Nicholas Taleb, and Richard J. Zeckhauser.
Introduces a new risk-management paradigm
Features contributions by leaders in finance and economics
Demonstrates how "killer risks" are often more economic than statistical, and crucially linked to incentives
Shows how to invest and design policies amid financial uncertainty


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About the Hardcover

Publisher Princeton University Press
Publish date 05/09/2010
Pages 380
ISBN-13 9780691128832
ISBN-10 0691128839
Language English