Pearson N.D. Risk Budgeting: Portfolio Problem Solving with Value-at-Risk

Wiley, 2002. — 334 p.This book describes the tools and techniques of value-at-risk and risk decomposition, which underlie risk budgeting. Most readers will never actually compute a value-at-risk (VaR) estimate. That is the role of risk measurement and portfolio management systems. Nonetheless, it is crucial that consumers of value-at-risk estimates and other risk measures understand what is inside the black box. This book attempts to teach enough so the reader can be a sophisticated consumer and user of risk information. It is hoped that some readers of the book will actually use risk information to do risk budgeting.While it is not intended primarily for a student audience, the level of the book is that of good MBA students. That is, it presumes numeracy (including a bit of calculus), some knowledge of statistics, and some familiarity with the financial markets and institutions, including financial derivatives. This is about the right level for much of the practicing portfolio management community. The book presents sophisticated ideas but avoids the use of high-brow mathematics. The important ideas are presented in examples. That said, the book does contain some challenging material.