Risk Analysis in Theory and Practice

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table2"> <tr> <td width="780"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table3"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_chavas_jean_(2004).jpg" width="132" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table4"> <tr> <td colspan="3" width="0%"> <p class="book_title">Risk Analysis in Theory and Practice </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap2"> <area href="../main/ratings.htm" shape="rect" coords="73, 0, 164, 33"> </map> <img border="0" src="../images_title/chavas8.gif" usemap="#FPMap2" width="204" height="158"></td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <div align="center"> <center> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table5"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </center> </div> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table6"> <tr> <td width="50%" valign="top"> <p align="left" class="body"><strong style="font-weight: 400">This is a foundational book. It explores the mathematical models of risk that underlie much of economics and essentially all of finance. The classic debates are presented—Knight's controversial distinction between risk and uncertainty; subjective vs. objective interpretations of probability, etc. Empirical tools for assessing risk are detailed—parametric and non-parametric statistics, Bayesian analysis, stochastic dominance. Models are explained—utility functions, safety-first, prospect theory. Applications are illustrated—production decisions, portfolio selection, contract design. </strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="125" align="left" id="table7"> <tr> <td width="120" height="10"> <font size="2"> </font></td> <td width="5" height="10"><font size="2"> </font></td> </tr> <tr> <td width="120"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td><td width="5"> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">The target audience is students or researchers in finance or economics. Theoretically-inclined finance practitioners will also appreciate the book. Discussions are theoretically substantive but accessible to a broad audience of practitioners. The book is not overly technical. If you understand calculus and basic probability, you can read the book. End of chapters exercises are creative and often fun. They bring the theory to life. </strong></p> <p align="left" class="body" style="margin-bottom: 10"><strong style="font-weight: 400">I like the book because it does not promote one viewpoint. Where there are alternative perspectives or techniques, Chavas presents each and leaves it up to the reader to make up her own mind.</strong></p> </td> <td width="50%" valign="top" class="body" align="left" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table8"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table9"> <tr> <td class="contents_expanded"> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">1. Introduction</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">2. The measurement of risk</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">3. The expected utility model</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">4. The nature of risk preferences</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">5. Stochastic dominance</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">6. Mean-variance analysis</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">7. Alternative models of risk behavior</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">8. Production decisions under risk</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">9. Portfolio selection</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">10. Dynamic decisions under risk</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">11. Contract and policy design under risk</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">12. Contract and policy design under risk: applications</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">13. Market stabilization</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">App. A Probability and statistics</p> <p class="contents_compressed" style="margin-top: 10; margin-bottom: 10">App. B Optimization</td> </tr> </table> </td> </tr> </table> <p align="left" class="body_expanded"><strong style="font-weight: 400">Financial practitioners will probably already have some familiarity with much of the material in this book. They have picked it up here and there along the way—a bit in school, more perhaps studying for the CFA exam, a few more nuggets gleaned chatting with some analyst on the trading floor. This can leave gaps in their knowledge or even misperceptions. That is why a book like this is so useful. It presents the entire theory as a unified whole. </strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">I have worked with risk for many years as both a practitioner and a researcher. I learned much reading this book. You will too.</strong></p> <p align="center" class="body"> </p> <p align="left" class="body"></p> </td> </tr> <tr> <td width="50%" valign="bottom"> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" width="100%" bgcolor="#FFFFCC" id="table10"> <tr> <td width="100%" align="left"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> <div align="left"> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" bgcolor="#FFFFCC" id="table11"> <tr> <td width="100%" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table12"> <tr> <td> <p class="body" style="margin-bottom: 6"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet"><img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/finance_general.htm">Finance - General</a></p> <p class="bullet"><img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/math_financial_math.htm">Mathematics - Financial Math</a></td> </tr> </table> </td> </tr> </table> </div> </td> <td>  </td> </tr> </table> </div>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a><br> <span class="verdana10">books direct link:</span> <a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>