The term "risk budgeting" is used to describe various contexts in which VaR is applied to support investment decisions. In a multi-manager setting, individual managers can be given risk budgets. Asset allocation and portfolio optimization can also be performed in terms of risk budgets. In this book, Neil Pearson gives a detailed introduction to VaR and then applies it to risk budgeting tasks.

The book covers linear, historical and Monte Carlo methods for calculating VaR. It considers simple remapping techniques, and provides a detailed discussion of principal component remappings. Theory is downplayed in favor of examples, some of which are quite elaborate. This informal approach will appeal to less technical readers. The discussion of VaR is not specific to investment management. It is as good as that offered in most introductory texts on VaR.

The treatment of risk budgeting is less satisfying. Models are justified mathematically but not financially. Again, theory is downplayed in favor of examples. This approach, which works with the established concept of VaR, is less effective with the still emerging concept of risk budgeting. Readers gain an intuitive sense of what risk budgeting is about, and they learn some of the mathematics. The author acknowledges that there are detractors of risk budgeting, but he could do more to explain their concerns. Strengths and weaknesses of risk budgeting concepts could be explored in more depth.

In summary, this book makes extensive use of examples to illustrate concepts. This works well in sections on VaR, which I think will appeal to a less technical audience. Readers are introduced to the mathematics of risk budgeting and gain an intuitive sense of what it is about.