Unperturbed By Volatility: A Practitioner'S Guide To Risk

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 Realworld 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 Contentspreface And Introductionnotations, Conventions And Abbreviations Market Realities1.1 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 Magnituderealized Volatility2.1 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 Volatility3.1 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 Semistatic Hedges, 3.6 Volatility Convexity, 3.7 Other Topicsimplied Skew: The Markets Opinion4.1 Skew 101, 4.2 Implied Distributions, 4.3 Implied Volatility And Fat Tailsvariance Instruments5.1 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 Variancevix6.1 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 Etnsimplied Volatility And Risk Premia7.1 Premia, Risk Transfers And Meanmode, 7.2 Convexity, Bounds And Moments, 7.3 Correlation, Dependency And Meanmodefoundations Of Tail Risk Hedging8.1 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 Hedgingcorrelation9.1 Dependence, Causality And Data, 9.2 Some Correlations And Their Practical Uses, 9.3 Correlation And Portfolio Allocation Of Correlation, 9.4 Trading Correlationdiversification Of Risk10.1 Diversity, Risk And Opportunity, 10.2 Knowledge And Assumption: More Vs Less, 10.3 Center And Tails, 10.4 Volatility Targets, 10.5 Risk Parityconcluding Thoughts Apendix: Fat Tails, Power Laws And Distributionsreferences