Dowd, Measuring Market Risk: Chapters 3, 4 & 7 Study Notes cover the following learning objectives:
Chapter 3: Estimating Market Risk Measures
Estimate VaR using a historical simulation approach.
Estimate VaR using a parametric approach for both normal and lognormal return distributions.
Estimate the expected shortfall given P/L or return data.
Define coherent risk measures.
Estimate risk measures by estimating quantiles.
Evaluate estimators of risk measures by estimating their standard errors.
Interpret QQ plots to identify the characteristics of a distribution.
Chapter 4: Non-Parametric Approaches
Apply the bootstrap historical simulation approach to estimate coherent risk measures.
Describe historical simulation using non-parametric density estimation.
Compare and contrast the age-weighted, volatility-weighted, correlation-weighted and filtered historical simulation approaches.
Identify advantages and disadvantages of non-parametric estimation methods.
Chapter 7: Parametric Approaches (II): Extreme Value
Explain the importance and challenges of extreme values in risk management.
Describe extreme value theory (EVT) and its use in risk management.
Describe the peaks-over-threshold (POT) approach.
Compare and contrast generalized extreme value and POT.
Evaluate the tradeoffs involved in setting the threshold level when applying the GP distribution.
Explain the importance of multivariate EVT for risk management.