The Professional Risk Managers' Guide to Finance Theory and Application (PRMIA Risk Management)

by Professional Risk Managers' International Association (PRMIA)

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Product Description
This comprehensive reference brings together ten of the world's leading scholars and practitioners, who provide invaluable perspectives on all aspects of finance theory and how they are applied to the process of risk management.

The book begins with an overview of risk and risk aversion, introducing utility functions and the mean-variance criterion. It then delivers a thorough introduction to portfolio mathematics, including discussion of the efficient frontier, portfolio theory, and portfolio diversification.

Written to help you fortify your defenses against extreme, unanticipated outcomes, and to ensure that returns are an adequate reward for risks taken, The Professional Risk Managers' Guide to Finance Theory and Application covers key issues such as:

The theory of capital allocation
Capital structure, that is, debt versus equity financing
The CAPM and multifactor models
Interest rate models
The term structure of interest rates
No-arbitrage pricing of futures and forwards
Risk-neutral valuation of options

Offering a global view not found elsewhere, The Professional Risk Managers' Guide to Finance Theory and Application arms institutional investors, professional financial analysts and traders, auditors, corporate treasurers, regulators and actuaries with the practical tools to master any financial field.

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Average Customer Review: 3.5 out of 5 stars

1 of 1 people found the following review helpful:

5 out of 5 stars

PRM series, 2008-11-27
I've done a masters in finance and am a level 3 CFA candidate.

Allow me to point out that this particular book is part of the PRMIA set used for study for the PRM designation. Three books, 'Finance theory application' (this one), 'Financial markets', and 'Financial instruments' provide a general understanding and will see you through the first exam. If you have a background like mine, these will be an easy and pleasant read. They set the background for the technical methods to come...

Personally the real benefit of the PRM material for me came with the second set of blue paperback books used for study for exams 2 and 3. It plugged an important gap in my knowledge. I highly recommend it to anyone who, like me, has a general finance and accounting background but is lacking on the maths/stats side and desires to to do something more quantitative.

One book in the series,'mathematical foundations of risk measurements' was a godsend to me. Topics such as calculus, matrix algebra, numerical methods for option valuation are presented in depth and with the aid of excel spreadsheet displays and instructions. This is non-trivial math (as opposed to CFA); even true quants will verify that for you (check the Wilmott forums for comments). Non-trivial explanations of forecasting volatility, VaR, expected losses on a credit portfolio etc. If you want to get into risk and quant generally, this is the most accessible series of books I've seen capable of taking you to a decent level. The fact you can get a designation out of it is a bonus.

BTW if you're tossing up between doing GARP's FRM and PRMIA's PRM, PRM is newer, presently still has a smaller membership base, is growing faster, and is well recognised in the UK but seems to still lag FRM in North America for recognition. The PRM material will be far better for your education; FRM takes a more CFA approach - it doesn't equip you so well technically.

0 of 3 people found the following review helpful:

2 out of 5 stars

Weak, 2008-08-08
Most books that are written by several authors lack continuity and tend to be lacking with repsect to learn-ability (this book does not escape that fate). The material is lacking in motivation; does not adequately build upon any foundation; uses outdated terms, notation, concepts; and is by far the weakest attempt at delivering the tools/knowledge necessary to effectivly master the concepts necessary to become a quality professional risk manager. At this point I am not sure who is the biggest let down in the battle for professional certification with respect to risk management, FRM or PRM.

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