Fixed Income Securities, Second Edition by Frank J. Fabozzi
Focus on Value: A Corporate and Investor Guide to Wealth Creation by James L. Grant and James A. Abate
Handbook of Global Fixed Income Calculations by Dragomir Krgin
Managing a Corporate Bond Portfolio by Leland E. Crabbe and Frank J. Fabozzi
Real Options and Option-Embedded Securities by William T. Moore
Capital Budgeting: Theory and Practice by Pamela P. Peterson and Frank J. Fabozzi
The Exchange-Traded Funds Manual by Gary L. Gastineau
Professional Perspectives on Fixed Income Portfolio Management, Volume 3 edited by Frank J. Fabozzi
Investing in Emerging Fixed Income Markets edited by Frank J. Fabozzi and Efstathia Pilarinu
Handbook of Alternative Assets by Mark J. P. Anson
The Global Money Markets by Frank J. Fabozzi, Steven V. Mann, and Moorad Choudhry
The Handbook of Financial Instruments edited by Frank J. Fabozzi
Interest Rate, Term Structure, and Valuation Modeling edited by Frank J. Fabozzi
Investment Performance Measurement by Bruce J. Feibel
The Handbook of Equity Style Management edited by T. Daniel Coggin and Frank J. Fabozzi
The Theory and Practice of Investment Management edited by Frank J. Fabozzi and Harry M. Markowitz
Foundations of Economic Value Added, Second Edition by James L. Grant
Financial Management and Analysis, Second Edition by Frank J. Fabozzi and Pamela P. Peterson
Measuring and Controlling Interest Rate and Credit Risk, Second Edition by Frank J. Fabozzi, Steven V. Mann, and Moorad Choudhry
Professional Perspectives on Fixed Income Portfolio Management, Volume 4 edited by Frank J. Fabozzi
The Handbook of European Fixed Income Securities edited by Frank J. Fabozzi and Moorad Choudhry
The Handbook of European Structured Financial Products edited by Frank J. Fabozzi and Moorad Choudhry
The Mathematics of Financial Modeling and Investment Management by Sergio M. Focardi and Frank J. Fabozzi
Short Selling: Strategies, Risks, and Rewards edited by Frank J. Fabozzi
The Real Estate Investment Handbook by G. Timothy Haight and Daniel Singer
Market Neutral Strategies edited by Bruce I. Jacobs and Kenneth N. Levy
Securities Finance: Securities Lending and Repurchase Agreements edited by Frank J. Fabozzi and Steven V. Mann
Fat-Tailed and Skewed Asset Return Distributions by Svetlozar T. Rachev, Christian Menn, and Frank J. Fabozzi
Financial Modeling of the Equity Market: From CAPM to Cointegration by Frank J. Fabozzi, Sergio M. Focardi, and Petter N. Kolm
Advanced Bond Portfolio Management: Best Practices in Modeling and Strategies edited by Frank J. Fabozzi, Lionel Martellini, and Philippe Priaulet
Analysis of Financial Statements, Second Edition by Pamela P. Peterson and Frank J. Fabozzi
Collateralized Debt Obligations: Structures and Analysis, Second Edition by Douglas J. Lucas, Laurie S. Goodman, and Frank J. Fabozzi
Handbook of Alternative Assets, Second Edition by Mark J. P. Anson
Introduction to Structured Finance by Frank J. Fabozzi, Henry A. Davis, and Moorad Choudhry
Financial Econometrics by Svetlozar T. Rachev, Stefan Mittnik, Frank J. Fabozzi, Sergio M. Focardi, and Teo Jasic
Developments in Collateralized Debt Obligations: New Products and Insights by Douglas J. Lucas, Laurie S. Goodman, Frank J. Fabozzi, and Rebecca J. Manning
Robust Portfolio Optimization and Management by Frank J. Fabozzi, Peter N. Kolm, Dessislava A. Pachamanova, and Sergio M. Focardi
Advanced Stochastic Models, Risk Assessment, and Portfolio Optimizations by Svetlozar T. Rachev, Stogan V. Stoyanov, and Frank J. Fabozzi
How to Select Investment Managers and Evaluate Performance by G. Timothy Haight, Stephen O. Morrell, and Glenn E. Ross
Bayesian Methods in Finance by Svetlozar T. Rachev, John S. J. Hsu, Biliana S. Bagasheva, and Frank J. Fabozzi
The Handbook of Municipal Bonds edited by Sylvan G. Feldstein and Frank J. Fabozzi
Subprime Mortgage Credit Derivatives by Laurie S. Goodman, Shumin Li, Douglas J. Lucas, Thomas A Zimmerman, and Frank J. Fabozzi
Introduction to Securitization by Frank J. Fabozzi and Vinod Kothari
Structured Products and Related Credit Derivatives edited by Brian P. Lancaster, Glenn M. Schultz, and Frank J. Fabozzi
Handbook of Finance: Volume I: Financial Markets and Instruments edited by Frank J. Fabozzi
Handbook of Finance: Volume II: Financial Management and Asset Management edited by Frank J. Fabozzi
Handbook of Finance: Volume III: Valuation, Financial Modeling, and Quantitative Tools edited by Frank J. Fabozzi
Finance: Capital Markets, Financial Management, and Investment Management by Frank J. Fabozzi and Pamela Peterson-Drake
Active Private Equity Real Estate Strategy edited by David J. Lynn
Foundations and Applications of the Time Value of Money by Pamela Peterson-Drake and Frank J. Fabozzi
Leveraged Finance: Concepts, Methods, and Trading of High-Yield Bonds, Loans, and Derivatives by Stephen Antczak, Douglas Lucas, and Frank J. Fabozzi
Modern Financial Systems: Theory and Applications by Edwin Neave
Institutional Investment Management: Equity and Bond Portfolio Strategies and Applications by Frank J. Fabozzi
Quantitative Equity Investing: Techniques and Strategies by Frank J. Fabozzi
Probability and Statistics for Finance by Svetlozar T. Rachev, Markus Hoechstoetter, Frank J. Fabozzi, and Sergio M. Focardi
The Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management by Pamela Peterson Drake and Frank J. Fabozzi
Simulation and Optimization in Finance: Modeling with MATLAB, @Risk, or VBA by Dessislava Pachamanova and Frank J. Fabozzi
Emerging Market Real Estate Investment: Investing in China, India, and Brazil by David J. Lynn and Tim Wang
The Handbook of Traditional and Alternative Investment Vehicles: Investment Characteristics and Strategies by Mark J. P. Anson and Frank J. Fabozzi
Financial Models with Levy Processes and Volatility Clustering by Svetlozar T. Rachev, Young Shin Kim, Michele L. Bianchi, Frank J. Fabozzi
Complying with the Global Investment Performance Standards (GIPS) by Bruce J. Feibel and Karyn D. Vincent
Mortgage-Backed Securities: Products, Structuring, and Analytical Techniques, Second Edition by Frank J. Fabozzi and Anand K. Bhattacharya
Quantitative Credit Portfolio Management: Practical Innovations for Measuring and Controlling Liquidity, Spread, and Issuer Concentration Risk by Arik Ben Dor, Lev Dynkin, Jay Hyman, and Bruce D. Phelps
Analysis of Financial Statements, Third Edition by Pamela Peterson Drake and Frank J. Fabozzi
Mathematical Methods for Finance: Tools for Asset and Risk Management by Sergio M. Focardi and Frank J. Fabozzi
Financial Advice and Investment Decisions: A Manifesto for Change by Jarrod W. Wilcox and Frank J. Fabozzi
The Basics of Financial Econometrics: Tools, Concepts, and Asset Management Applications by Frank J. Fabozzi, Sergio M. Focardi, Svetlozar T. Rachev, Bala G. Arshanapalli, and Markus Hoechstoetter
Quantitative Financial Risk Management: Theory and Practice by Constantin Zopounidis and Emilios Galariotis
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Library of Congress Cataloging-in-Publication Data
Zopounidis, Constantin.
Quantitative financial risk management: theory and practice / Constantin Zopounidis, Emilios Galariotis.
pages cm. – (The Frank J. Fabozzi series)
Includes index.
ISBN 978-1-118-73818-4 (hardback)
1. Financial risk management. I. Galariotis, Emilios. II. Title.
HD61.Z67 2015
332–dc23
This work is dedicated to our families for their support and encouragement, as well as for their understanding.
More specifically, Constantin Zopounidis wishes to dedicate this to his wife, Kalia, and children, Dimitrios and Helene.
Emilios Galariotis wishes to dedicate this to his wife, Litsa, his children, Irini and Vasileios, and his parents, Christos and Irini.
Preface
The book Quantitative Financial Risk Management: Theory and Practice provides an invaluable forum for creative and scholarly work on financial risk management, risk models, portfolio management, credit risk modeling, portfolio management, and financial markets throughout the world.
Quantitative financial risk management consists of economics, accounting, statistics, econometrics, mathematics, stochastic processes, and computer science and technology. The tools of financial management are more frequently being applied to manage, monitor, and measure risk, especially in the context of globalization, market volatility, and economic crisis.
The main objectives of this book are to advance knowledge related to risk management and portfolio optimization, as well as to generate theoretical knowledge with the aim of promoting research within various sectors wherein financial markets operate. Chapters will relate to one of these areas, will have a theoretical and/or empirical problem orientation, and will demonstrate innovation in theoretical and empirical analyses, methodologies, and applications.
We would like to thank the assistant editors Georgios Manthoulis and Stavroula Sarri for their invaluable help. We extend appreciation to the authors and referees of these chapters, and to the editors at John Wiley & Sons, Inc., for their assistance in producing this book.
The editors, Constantin Zopounidis Emilios Galariotis
About the Editors
Constantin Zopounidis is professor of Financial Engineering and Operations Research at Technical University of Crete in Greece, distinguished research professor at Audencia Nantes, School of Management (EQUIS, AMBA, AACSB) in France, senior academician of the Royal Academy of Doctors and the Royal Academy of Economics and Financial Sciences of Spain, and elected president of the Financial Engineering and Banking Society (FEBS).
His research interests include financial engineering, financial risk management, and multiple-criteria decision making. He has edited and authored more than 70 books in international publishers and more than 450 research papers in scientific journals, edited volumes, conference proceedings, and encyclopedias in the areas of finance, accounting, operations research, and management science. Prof. Zopounidis is editor-in-chief and member of the editorial board of several international journals. In recognition of his scientific work, he has received several awards from international research societies.
Emilios Galariotis is professor of Finance at Audencia Nantes School of Management (AMBA, EQUIS, AACSB) in France. He is the founder and director of the Centre for Financial and Risk Management (CFRM) and head of research in the area of Finance, Risk, and Accounting Performance at Audencia.
His academic career started at Durham University and head of research in the area of Finance, Risk, and Accounting Performance as well as co-chair of the department of Accounting and Finance at Audencia. UK. There, beyond his academic role. His academic career started at Durham University, UK (Top 100 in the world, 3rd oldest in England), he was also director of Specialized Finance Masters Programs. His research interests include behavioral finance and market efficiency, contrarian and momentum investment strategies, and liquidity.
His work has been published in quality refereed journals, such as (to mention only the most recent) the European Journal of Operational Research, the Journal of Banking and Finance, as well as the Wiley Encyclopedia of Management. Professor Galariotis is associate editor and member of the editorial board of several international journals, and member of the board of directors of the Financial Engineering and Banking Society and distinguished researcher at various research centers.