Additional Readings for FRM


     ·        Case Study - Rand Merchant Bank

                        ·        Risk management at PIMCO. Description of measurement and management of fixed-income risks.

·        Kuprianov, 1995, Case studies of large losses in derivative markets. Metallgesellschaft and Barings.

·        Digenan et al., 1995, Metallgesellschaft AG: A Case Study.

·        Krapels, 2001, Re-examining the Metallgesellschaft Affair and its Implication for Oil Traders.

·        Orange County case by Philippe Jorion

·        Jorion, 2000, Risk management lessons from Long-Term Capital Management, European Financial Management 6, 277-300. Analysis of LTCM failure.

·        Coy and Woolley, Failed wizards of Wall street, 1998, Business Week. Discussion of strategies pursued by LTCM and other arbitrageurs.


·        West, 2004, Risk measurement for financial institutions. General survey.

·        Alexander, 2003, The present and future of financial risk management, ISMA Center Discussion Papers in Finance 2003-12. The first part of the paper discusses the recent trends in risk management.

Market risk

·        Berkowitz and O’Brien, 2002, How accurate are Value-at-Risk models at commercial banks? Journal of Finance 57(3), 1093-1111. Backtesting of VaR, comparison with GARCH.

·        Christoffersen and Diebold, 1999, How relevant is volatility forecasting for financial risk management. Model-free procedure for assessing volatility forecastability across different horizons.

·        Brooks and Persand, 2003, Volatility forecasting for financial risk management, Journal of Forecasting 22, 1-22.

·        Ahmed, 2001, Forecasting correlation among equity mutual funds, Journal of Banking and Finance 25, 1187-1208. Good survey of different methods to estimate future correlations.

·        Campbell, 2001, Optimal portfolio selection in a Value-at-Risk framework, Journal of Banking and Finance 25, 1789-1804.

·        Billio and Pelizon, 2000, Value-at-Risk: A multivariate switching regime approach, Journal of Empirical Finance 7, 531-554.

·        Longin, 2000, From value at risk to stress testing: the extreme value approach, Journal of Banking and Finance 24, 1097-1130.

·        Hawkins, 1997, Risk analysis techniques, GARP FRM exam review class notes. Survey of VaR methods, including sample exam questions and answers.

Liquidity risk

·        Bekaert, Harvey, and Lundblad, 2003, Liquidity and expected returns: lessons from emerging markets.

Credit risk

·        Crouhy, Galai, and Mark, 2000, A comparative analysis of current credit risk models, Journal of Banking and Finance 24, 59-117.

·        Bharath and Shumway, 2004, Forecasting Default with the KMV-Merton Model. Comparing the default forecasting quality of the KMV model with a simpler approach.

·        Vassalou and Xing, 2004, Default Risk in Equity Returns, Journal of Finance 59(2), 831-868. Studying relation between default risk and other (e.g, size and book-to-market) equity risks.

Additional sources

·        RiskMetrics Group:

o       RiskMetrics technical document (1996), evolution of a standard (its update, 1999), and practical guide (1999)

o       CreditGrades technical document (description of the structural model, 2002), CreditMetrics technical document (1997)

·        Moody’s KMV white papers on credit risk

·        Risk management links on the web

·        Articles on credit risk from Tavakoli Structured Finance