"Dr Marcelo Cruz is rightfully acknowledged as a world expert in the quantification of operational risk. He has set out to produce a book that is comprehensive yet also comprehensible to non-mathematicians - and is to be congratulated for succeeding in this aim. This book should be regarded as essential reading for all professional risk managers, irrespective of their particular lens of perception." Brendan Young, Chairman, Operational Risk Research Forum "As a technically trained analyst, Marcelo Cruz summarizes a wide range of mathematical techniques. As an experienced capital markets trader and risk manager, he provides real world examples of their relevance for operational risk. This will be a common reference work in the field for years to come." David M. Rowe, Ph.D., Group Executive Vice President for Risk Management Sun Gard Trading and Risk Systems
Operational risk is an important, yet little explored, area within risk management. The need to model and measure the risks arising from operational errors and to allocate capital against them will be soon become a regulatory requirement for financial institutions. In this book, Marcelo Cruz provides a quantitative look at the subject, presenting several mathematical models that can be used and adapted to measure, manage and hedge operational risk. Based on the author's extensive experience, the book maps out state-of-the-art mathematical and statistical techniques that can be used to model operational risk. In addition, the book describes a variety of appropriate models that can be applied to specific structures or areas, including operational risk database modeling, stochastic models, statistical distributions for frequency and severity, extreme value theory, operational VaR models, artificial intelligence models, dynamic multifactor models, Bayesian analysis, Monte Carlo simulation, stress test/ scenario analysis, real options, state-space models and the Kalman filter, Markovian stochastic models and others. These models have been tested with real data in real operational events. Based on this experience, numerous examples are sited throughout. Modeling, Measuring and Hedging Operational Risk provides a complete quantitative reference for all those involved in modeling and managing operational risk as well as for those involved with developing hedging products for operational risk within insurance companies and derivatives houses. |
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1 of 1 found the following review helpful:
 Mistakes everywhereNov 28, 2007
Because it was recommended by someone else, I chose this book to use in a class where we used a few weeks to cover the fundamentals of operational risk. It was my worst choice ever. It's true that the book contains many good ideas on risk management. But, from the quantitative point of view it's terrible. I think not a single page is free of mistakes. If you're thinking of implementing something, this book is useless. You'll end up looking somewhere else to get the right formulas.
6 of 7 found the following review helpful:
The most annoying "math" book everMar 20, 2005
Before I read this book, I had heard it was the bible for operation risk and is great as an introductory book for finance. After I read 1/3 of the book, I figured this book is actually for people who failed their second year statistics courses and still have no idea what raw and central moments are. As a grad student in Actuarial Science in one of the best schools in the world, I strongly discourage people from buying this book. Technically, this book has so many mistakes that it would not be qualified as a textbook in any schools in the world. The author introduces a lot of statistical tests without even defining the notations, which makes the tests useless.
4 of 5 found the following review helpful:
 See if you can find all the mistakesFeb 28, 2005
I only got to page 100 so far, but there seems to be a bug on very other page. It's more like a test for the reader "see if you can find all the mistakes". I'm rather disappointed. If this book is aiming to become a "statistical bible" of the operational risk industry, the formulas, graphs, examples etc need revision.
7 of 9 found the following review helpful:
 The Bible for Operational RiskJan 17, 2003
This is by far the best book in the area. It brings in details all the current technical discussions allowing even the reader with minimal math background to understand and even try the techniques stated in the book. Every risk manager must have it at least as a reference. The author carefully describes several techniques as:
1) Loss distribution approaches;
2) Scorecard approach;
3) Extreme value theory;
4) OpRisk management models;
5) Modeling and developing hedging programs.Excellent value for the money!
8 of 13 found the following review helpful:
Only for quantsJan 03, 2003
The book is for those with a Phd or strong math background - the writer does not attempt to cater to anyone else. Don't bother trying to understand the models discussed if you don't have this knowledge - get your Phd first! A waste of money unless you know mathematical concepts such as MLE, Fast Fourier etc.
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based on 9 reviews
