A Practical Guide to Risk Management

by Thomas S. Coleman

Managing risk is at the core of managing any financial organization. Risk measurement and quantitative tools are critical aids for supporting risk management, but quantitative tools alone are no substitute for judgment, wisdom, and knowledge. Managers within a financial organization must be, before anything else, risk managers in the true sense of managing the risks that the firm faces.

Genres: Business, Finance

206 pages, Kindle Edition

First published July 8, 2011

Reviews

[Arjun Pathy · Rating 4 out of 5]

I am a bit biased toward this book because I admire Thomas Coleman and his ability to bridge academia and finance, both in his own career and in his writing (it also helps that he is a friend of Heckman, whom I also greatly respect). This text was helpful in establishing the role of risk management and highlighting the importance of combining the quantitative (risk measurement) and qualitative (risk management) aspects of working in portfolio management. I appreciated that Coleman acknowledged that complicated measures/models are often just as good or worse than simple rules of thumb (such as Goldman's 4-sigma heuristic). Some of the models were foreign purely due to my mathematical incompetence, but the broad ideas stuck. Otherwise, the characterization of CDS as a floating rate note was kind of like an "aha moment" and made me think about the product more intuitively. While most of the ideas will likely not come up in my everyday life for some time, it was a worthwhile read; I now know what the hell DV01 and VaR mean.

[Ed Barton · Rating 5 out of 5]

Approachable, Entertaining and Enlightening

Reading finance texts is often a painful exercise. This is an exception. Discussing the complex world of risk, long tails and statistics is tough. Coleman makes it reasonable, interesting and big picture enough to understand if you have a basic background in the subject. This is a great read, and well footnoted accompanied by a lengthy reference section for deeper diving. You'll understand risk better and have an appreciated for the imprecise precision in measuring and managing risk. Great read.

[J Michael · Rating 5 out of 5]

A wonderful combination of human and quantitative explanation on how to navigate a stochastic world. It's careful introduction to the processes of condition probability and stochastic systems provide a unique challenge to readers with established belief in financial industry dogma. This guide leads the reader to draw their own conclusions about complex real world problems, and encourages deep contemplation about the mathematical tools used to simplify complex human interactions. A must read.

[Pedro Pinto · Rating 3 out of 5]

Good insights about this complex and interesting topic. An introduction (doubts about the practicality),as a caveat you do need advanced knowledge in probabilities, statistics, and complex financial instruments to fully understand all the examples provided.

[Harry Harman · Rating 5 out of 5]

Risk management is “risk measurement” + management of people to be prepared for future uncertain risk. What will they do when something goes wrong and it’s never happened before?

Written by the head of Risk Management at Goldman Sachs for four years.

[J. T. · Rating 3 out of 5]

Too much volatility

This is an odd book because it oscillates between basic introduction and deep dive into calculations. Nevertheless it is a useful book.

[Janne Virtala · Rating 3 out of 5]

I didnt finish this book. Good but not excellent book, at least not excellent with my reading intensity.