Unperturbed By Volatility: A Practitioner's Guide To Risk
Product ID: 186977071
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Central to all investment allocation and risk management is being clear on what risks one is being compensated for in the reward delivered. In an era of increasingly interlaced markets, assessing this correctly is paramount, but often used measures such as volatility can in practice be inadequate and misleading without other serious and often more important considerations. Unperturbed by Volatility takes a deep look at the essential features of real-world financial markets, analyzing the strengths and the limitations of various metrics, techniques and methods, where these can be tweaked to work, where metrics such as volatility break down, and where in practice we must seek constructions that make such errors manageable. Primary themes also include the limits of data, and the role of market extremes - both up and down and in both risk and opportunity. Relevant issues are diagnosed within a consistent framework that forces market realities to the fore and from which useful conclusions can be drawn. All available market instruments are put to full use. Unperturbed by Volatility is built on strong theoretical grounds and practical insights. Drawing on applicable elements from diverse quantitative disciplines, from probability theory to statistical tools to quantitative finance and others, the book requires some prior knowledge but its delivery is not heavily mathematical. The simple, robust and useful is given preference over the technically fancy. Table Of Contents Preface and Introduction Notations, Conventions and Abbreviations Market Realities 1.1 Market Truth, 1.2 Normality and Reality, 1.3 Power Laws, 1.4 Convergence, 1.5 Can One Number Fit All?, 1.6 Cognitive Biases and Data, 1.7 Orders of magnitude Realized Volatility 2.1 Consistency and Robustness Under Real Data, 2.2 Standard Deviation versus Mean Absolute Deviation, 2.3 Characteristics of Realized Volatility, 2.4 Modeling of Spot Returns and Volatility, Convexity and Implied Volatility 3.1 A Little History, 3.2 Convexity and Volatility, 3.3 Complete, Completed and Incomplete Markets, 3.4 Implied Volatility, Preferences and Risk Premia, 3.5 Replication, and the Case for Semi-static Hedges, 3.6 Volatility Convexity, 3.7 Other Topics Implied Skew: The Market’s Opinion 4.1 Skew 101, 4.2 Implied Distributions, 4.3 Implied Volatility and Fat Tails Variance Instruments 5.1 Volatility Digest, 5.2 Variance Swaps, 5.3 Volatility Modelling and Market Models, 5.4 Vol of Vol and Variance Dynamics, 5.5 Volatility Swaps, 5.6 Variations on Variance VIX 6.1 VIX: A Brief History, 6.2 VIX in a Nutshell, 6.3 VIX Futures, 6.4 VIX Options, 6.5 Rules of Thumb, 6.6 VIX ETFs and ETNs Implied Volatility and Risk Premia 7.1 Premia, Risk Transfers and Mean-Mode, 7.2 Convexity, Bounds and Moments, 7.3 Correlation, Dependency and Mean-Mode Foundations of Tail Risk Hedging 8.1 Tail Events and Tail Risk Hedging, 8.2 Characteristics of a Tail Hedge, 8.3 Executional Considerations, 8.4 Motives, Framings and Merits for Tail Risk Hedging Correlation 9.1 Dependence, Causality and Data, 9.2 Some Correlations and Their Practical Uses, 9.3 Correlation and Portfolio Allocation of Correlation, 9.4 Trading Correlation Diversification of Risk 10.1 Diversity, Risk and Opportunity, 10.2 Knowledge and Assumption: More vs Less, 10.3 Center and Tails, 10.4 Volatility Targets, 10.5 Risk Parity Concluding Thoughts Apendix: Fat Tails, Power Laws and Distributions References Review: Sophisticated treatment, recommended - Great book. Very sophisticated treatment but the authors bend over backwards to make it accessible. Wish they had included an index. Recommended. Review: Good book with clear and technical explaination - Good book with clear explanation for all level entry
| Best Sellers Rank | #238,477 in Books ( See Top 100 in Books ) #81 in Financial Risk Management (Books) #110 in Economics (Books) #125 in Options Trading (Books) |
| Customer Reviews | 4.9 out of 5 stars 30 Reviews |
G**N
Sophisticated treatment, recommended
Great book. Very sophisticated treatment but the authors bend over backwards to make it accessible. Wish they had included an index. Recommended.
T**S
Good book with clear and technical explaination
Good book with clear explanation for all level entry
A**R
A must-have for any option trader/risk manager!
A great empirical journey inside the life of option trading and risk managing. The approximations and evaluations of second and third order effects will be especially helpful to any practitioner!
J**J
Nearly unreadable font!
This review pertains largely to the print/font quality of the paperback. It's so small, I can hardly read it! There's some great material inside, but I had to use a tablet to magnify the pages. I couldn't stand it any longer after 1 chapter. There is no kindle version. If any of the authors read this, please take note. After making all this effort, don't let it go to waste by using a low quality microscopic font size.
S**L
technical for practitioners, enlightening for non practitioners
This book can be read by practitioners and will certainly enable them to be unperturbed as it is both complete and non-equivocal in terms of technical descriptions. Historical data and sensitivity graphs are always there when needed, rules of thumb are also very relevant. But it can also be read by non-practitioners since all contexts are written in plain English and the introduction to each concept enlightens it for any educated and curious reader. Overall the construction is logical and the tone (“skew 101”) is light, making it one of the few books that can be consulted on this topic without reluctance.
T**S
interesting perspectives on risk in quantitative finance
As the subtitle suggests this is a guide for a (quantitative) finance practitioner's thinking about risk. Throughout the book the emphasis is not on the maths but the way one should think about risk e.g. volatility vs risk, risk being visible in the centre but hidden in the tails, convexity etc. and also on the importance of the particulars in assessing risk e.g. the importance of time-frames, the limitation of data, etc. The concepts are certainly not new to experienced quants, but the exposition is clear, with plenty of given examples and interesting historical references and context. The authors are guided by, and try to convey to the reader, an attitude towards risk: avoid prescribing universal solutions, always question what the main risks are, where they are hidden, and try to avoid them by construction whenever possible. The book strikes a good balance between theory and practice—neither too basic, nor too technical. I found that it explained some difficult concepts well (e.g. volatility of volatility), while often bringing a different perspective to the subject (e.g. the standard Black-Scholes replication). Not all chapters are equal, and not everyone will agree with their content, but there is something engaging and fresh in all of them. Overall the authors do not claim novelty—they present technical material guided by a non-stylized “skin-in-the-game” understanding of risk. I would definitely recommend it to quantitative practitioners early in their career, postgraduate mathematical finance students that want some exposure to practical considerations and sufficiently quantitatively-minded investors.
J**.
Great content
A really great book, concise and practical. However the print could be better, it is too dim for my liking
S**M
Very comprehensive and insightful
Possibly the most comprehensive practical guide on volatility in financial markets. The book strikes a good balance between explaining the theory and giving realistic guidelines on how to think about volatility. One can sense that the authors write from their experience, which is helpful in conveying some of the more challenging pitfalls investors can fall into when assessing risk. For the authors, volatility, or risk, is not one thing, but a market reality that can appear in different guises and forms. Worth reading just for this insight, but you'll learn the theory and technical concepts on the way too.
G**M
Comprehensive and insightful!
Very insightful book. I specifically enjoyed chapters 8 and 10. Would recommend this for practitioners and academics as this book bridges the gap between academia and practice. Well written. Technical enough but easy to understand. You can definitely see the approach the authors have taken reflects their experience as finance professionals but also their academic background. I also specifically liked chapter 11.
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