{"product_id":"contemporary-finance-isbn-9781394179626","title":"Contemporary Finance","description":"\u003cp\u003e\u003cb\u003eA clear new finance textbook that explains essential models and practices, and how the financial world works now\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003ci\u003eContemporary Financial Markets and Institutions: Tools and Techniques to Manage Risk and Uncertainty\u003c\/i\u003e is an ideal introduction to finance for professionals and students. It covers the basic finance theory required to understand the contemporary financial world and builds on it to present finance in a detailed yet comprehensible way. It explains markets and institutions, and the central bank and government policies that influence how they operate.\u003c\/p\u003e \u003cp\u003eThe book begins with an overview of basic finance theory, including investments, asset return behavior, derivatives pricing, and credit risk. It discusses topics that have dominated markets in recent decades, such as extreme events, liquidity, currency and debt crises, and radical changes in monetary policy and regulation. The concepts are presented alongside examples, strange market episodes, and data from recent experience. \u003ci\u003eContemporary Financial Markets and Institutions\u003c\/i\u003e covers advanced credit topics like securitization in a straightforward, succinct way, without advanced mathematics, but with detailed examples using real market data. It integrates financial and macroeconomic content seamlessly. The book is suitable for use by undergraduate and graduate students, and by practitioners of all backgrounds. Abundant pedagogical resources in the book and online facilitate teaching.\u003cbr\u003e\u003cbr\u003eThis book will help students and practitioners:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eLearn the basic concepts and models in finance, including investment, asset pricing, uncertainty and risk, monetary policy and the regulatory system\u003c\/li\u003e \u003cli\u003eExplore recent developments, from the expansion of central banks to the chaos in commercial banking to changes in financial technology, that are dominating markets worldwide\u003c\/li\u003e \u003cli\u003eGain knowledge of risk types, models, and measurement methods, and the impact of regulation\u003c\/li\u003e \u003cli\u003ePrepare yourself for a successful career in finance, or update your existing knowledge base with this comprehensive reference guide\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eIdeal as a sole or supplementary textbook for beginning and advanced finance courses, as well as for practitioners in finance-related fields, this book takes a unique, market-focused approach that will serve readers well in our turbulent and puzzling times.\u003c\/p\u003e \u003cp\u003eList of Figures xiii\u003c\/p\u003e \u003cp\u003eList of Tables xvii\u003c\/p\u003e \u003cp\u003ePreface xix\u003c\/p\u003e \u003cp\u003eAbout the Author xxi\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart I Finance in the Economic System 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Functions and Structure of the Financial System 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Functions of the Financial System 3\u003c\/p\u003e \u003cp\u003e1.2 Market Participants, Intermediaries, and Governments 4\u003c\/p\u003e \u003cp\u003e1.3 Assets and Markets 6\u003c\/p\u003e \u003cp\u003e1.3.1 Money and Money Markets 6\u003c\/p\u003e \u003cp\u003e1.3.2 Foreign Exchange 7\u003c\/p\u003e \u003cp\u003e1.3.3 Digital Currencies 7\u003c\/p\u003e \u003cp\u003e1.3.4 Equity, Loans, and Bonds 7\u003c\/p\u003e \u003cp\u003e1.3.5 Spot and Derivative Assets 9\u003c\/p\u003e \u003cp\u003e1.3.6 Alternative Investments 11\u003c\/p\u003e \u003cp\u003e1.4 Mechanics of Trading 12\u003c\/p\u003e \u003cp\u003e1.4.1 Asset Positions and Risk Exposures 12\u003c\/p\u003e \u003cp\u003e1.4.2 Market Microstructure 14\u003c\/p\u003e \u003cp\u003e1.4.3 Payment Systems 15\u003c\/p\u003e \u003cp\u003e1.4.4 Clearing and Settlement 16\u003c\/p\u003e \u003cp\u003eFurther Reading 17\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Asset Returns and Risk 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Asset Returns and Interest Rates 19\u003c\/p\u003e \u003cp\u003e2.1.1 Measuring Asset Returns 19\u003c\/p\u003e \u003cp\u003e2.1.2 Interest Rates and Yield Curves 22\u003c\/p\u003e \u003cp\u003e2.1.3 Total Returns and Asset Values 25\u003c\/p\u003e \u003cp\u003e2.1.4 Inflation and Real Returns 26\u003c\/p\u003e \u003cp\u003e2.1.5 Excess Returns 29\u003c\/p\u003e \u003cp\u003e2.2 Asset Return Probability Distributions 30\u003c\/p\u003e \u003cp\u003e2.3 Financial Risks 32\u003c\/p\u003e \u003cp\u003e2.3.1 Market Risk 32\u003c\/p\u003e \u003cp\u003e2.3.2 Credit Risk 33\u003c\/p\u003e \u003cp\u003e2.3.3 Operational Risks 34\u003c\/p\u003e \u003cp\u003eFurther Reading 35\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Information, Preferences, and Asset Prices 37\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Information and the Quantification of Risk 37\u003c\/p\u003e \u003cp\u003e3.1.1 Conceptions of Equilibrium 37\u003c\/p\u003e \u003cp\u003e3.1.2 Technical Progress 39\u003c\/p\u003e \u003cp\u003e3.1.3 Frictions and Transaction Costs 40\u003c\/p\u003e \u003cp\u003e3.1.4 Institutions 41\u003c\/p\u003e \u003cp\u003e3.2 Risk Premiums 42\u003c\/p\u003e \u003cp\u003e3.2.1 The Convention of the Risk-Free Rate and Reference Rates 42\u003c\/p\u003e \u003cp\u003e3.2.2 Expected Returns and Risk Premiums 43\u003c\/p\u003e \u003cp\u003e3.2.3 Interest Rate Spreads 46\u003c\/p\u003e \u003cp\u003e3.3 An Era of Low Interest Rates and Slowing Growth 48\u003c\/p\u003e \u003cp\u003e3.3.1 Safe Assets 52\u003c\/p\u003e \u003cp\u003e3.3.2 Rising Debt 54\u003c\/p\u003e \u003cp\u003eFurther Reading 55\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart II Markets, Uncertainty, and Risk 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 The Behavior of Asset Returns over Time 59\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Standard Model of Asset Price Behavior and Reality 59\u003c\/p\u003e \u003cp\u003e4.2 Return, Volatility, and Correlation Behavior 61\u003c\/p\u003e \u003cp\u003e4.2.1 Return Predictability 61\u003c\/p\u003e \u003cp\u003e4.2.2 Time Variation in Return Volatility 62\u003c\/p\u003e \u003cp\u003e4.2.3 Time Variation in Return Correlation 62\u003c\/p\u003e \u003cp\u003e4.3 Volatility Forecasting 64\u003c\/p\u003e \u003cp\u003e4.3.1 Simple Approaches to Volatility Estimation 64\u003c\/p\u003e \u003cp\u003e4.3.2 The GARCH Model 66\u003c\/p\u003e \u003cp\u003e4.3.3 The Exponentially Weighted Moving Average Model 67\u003c\/p\u003e \u003cp\u003e4.4 Tail Risk: the Prevalence of Extremes 70\u003c\/p\u003e \u003cp\u003e4.4.1 Extreme Asset Returns 70\u003c\/p\u003e \u003cp\u003e4.4.2 Skewness and Kurtosis 72\u003c\/p\u003e \u003cp\u003e4.4.3 Clues to Financial Puzzles in the Behavior of Volatility 73\u003c\/p\u003e \u003cp\u003eFurther Reading 75\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Capital Markets: How Asset Prices Are Determined 77\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Portfolios, Diversification, and Investor Choice 77\u003c\/p\u003e \u003cp\u003e5.1.1 Portfolio Risk 77\u003c\/p\u003e \u003cp\u003e5.1.2 Optimal Investor Choice 80\u003c\/p\u003e \u003cp\u003e5.2 The Capital Asset Pricing Model 82\u003c\/p\u003e \u003cp\u003e5.2.1 The Efficiency of the Market Portfolio 83\u003c\/p\u003e \u003cp\u003e5.2.2 Estimating Systematic and Nonsystematic Risk 84\u003c\/p\u003e \u003cp\u003e5.2.3 More General Factor Models 86\u003c\/p\u003e \u003cp\u003eFurther Reading 87\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Derivatives Values and Risks 89\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Futures, Forwards, and Swaps 89\u003c\/p\u003e \u003cp\u003e6.1.1 Forward Foreign Exchange Markets 91\u003c\/p\u003e \u003cp\u003e6.1.2 Valuation of Interest Rate Swaps 94\u003c\/p\u003e \u003cp\u003e6.1.3 The LIBOR Transition 95\u003c\/p\u003e \u003cp\u003e6.1.4 Credit Default Swaps 96\u003c\/p\u003e \u003cp\u003e6.2 Options 98\u003c\/p\u003e \u003cp\u003e6.2.1 Option Values 98\u003c\/p\u003e \u003cp\u003e6.2.2 The Option-Implied Volatility Surface 101\u003c\/p\u003e \u003cp\u003e6.2.3 Option Risks 102\u003c\/p\u003e \u003cp\u003e6.2.4 Put-Call Parity 104\u003c\/p\u003e \u003cp\u003e6.2.5 Interest Rate Implied Volatility 104\u003c\/p\u003e \u003cp\u003e6.3 Market-Implied Asset Price Forecasts 105\u003c\/p\u003e \u003cp\u003e6.3.1 Risk-Neutral Mean Forecasts 105\u003c\/p\u003e \u003cp\u003e6.3.2 Risk-Neutral Volatility and Correlation Forecasts 107\u003c\/p\u003e \u003cp\u003e6.3.3 Risk-Neutral Probability Distributions 107\u003c\/p\u003e \u003cp\u003eFurther Reading 109\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Capital Market Efficiency 111\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Asset Price Behavior in an Efficient Market 111\u003c\/p\u003e \u003cp\u003e7.1.1 Validating the Efficient Markets Hypothesis 112\u003c\/p\u003e \u003cp\u003e7.1.2 Market Efficiency, Preferences, and Knowledge 113\u003c\/p\u003e \u003cp\u003e7.2 Apparent Violations of Market Efficiency 114\u003c\/p\u003e \u003cp\u003e7.2.1 Slow Arbitrage 114\u003c\/p\u003e \u003cp\u003e7.2.2 Basis Spreads 115\u003c\/p\u003e \u003cp\u003e7.2.3 Foreign Exchange Markets 116\u003c\/p\u003e \u003cp\u003e7.3 Efficacy of Active Management 117\u003c\/p\u003e \u003cp\u003e7.3.1 Passive and Active Investment Management 117\u003c\/p\u003e \u003cp\u003e7.3.2 Empirical Validation of Active Management 118\u003c\/p\u003e \u003cp\u003e7.3.3 Alternative Investments 122\u003c\/p\u003e \u003cp\u003eFurther Reading 126\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Market Risk 129\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Definition of Value-at-Risk 129\u003c\/p\u003e \u003cp\u003e8.1.1 Why Value-at-Risk? 129\u003c\/p\u003e \u003cp\u003e8.1.2 Value-at-Risk Is a Quantile 130\u003c\/p\u003e \u003cp\u003e8.2 Computing Value-at-Risk for One Risk Factor 130\u003c\/p\u003e \u003cp\u003e8.2.1 Modeling Approaches to Value-at-Risk Estimation 130\u003c\/p\u003e \u003cp\u003e8.2.2 Parametric Normal Value-at-Risk 133\u003c\/p\u003e \u003cp\u003e8.2.3 Computing Value-at-Risk via Monte Carlo Simulation 134\u003c\/p\u003e \u003cp\u003e8.2.4 Computing Value-at-Risk via Historical Simulation 134\u003c\/p\u003e \u003cp\u003e8.2.5 Value-at-Risk for Short Positions 136\u003c\/p\u003e \u003cp\u003e8.2.6 Comparison of Value-at-Risk Computation Approaches 138\u003c\/p\u003e \u003cp\u003e8.3 Nonlinear Market Risks 138\u003c\/p\u003e \u003cp\u003e8.3.1 Nonlinearity and Risk Measurement 138\u003c\/p\u003e \u003cp\u003e8.3.2 Applying Delta-Gamma Value-at-Risk to the Value of an Option 139\u003c\/p\u003e \u003cp\u003e8.3.3 Portfolio Value-at-Risk 141\u003c\/p\u003e \u003cp\u003e8.4 Incorporating Extreme Events Into Risk Measurement 142\u003c\/p\u003e \u003cp\u003e8.4.1 Why Not Value-at-Risk? 142\u003c\/p\u003e \u003cp\u003e8.4.2 Stress Testing and Scenario Analysis 143\u003c\/p\u003e \u003cp\u003e8.4.3 Expected Shortfall 145\u003c\/p\u003e \u003cp\u003eFurther Reading 148\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Credit and Counterparty Risk 149\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Default, Bankruptcy, and Resolution 149\u003c\/p\u003e \u003cp\u003e9.1.1 Equity, Debt, and Leverage 149\u003c\/p\u003e \u003cp\u003e9.1.2 Information Costs in Credit Intermediation 150\u003c\/p\u003e \u003cp\u003e9.1.3 Default and Migration 151\u003c\/p\u003e \u003cp\u003e9.1.4 Counterparty Risk, and Collateral 152\u003c\/p\u003e \u003cp\u003e9.1.5 Bankruptcy, Capital Structure, and Resolution 153\u003c\/p\u003e \u003cp\u003e9.2 Quantifying Credit Risk 155\u003c\/p\u003e \u003cp\u003e9.2.1 Credit Risk Metrics 155\u003c\/p\u003e \u003cp\u003e9.2.2 Default Modeling 156\u003c\/p\u003e \u003cp\u003e9.2.3 Intensity Models and Default Time Analytics 157\u003c\/p\u003e \u003cp\u003e9.3 Single-Obligor Credit Risk Models 158\u003c\/p\u003e \u003cp\u003eFurther Reading 162\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart III Market Institutions and Risk Assessment 163\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Interest Rate Risk 165\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Sources of Interest Rate Risk 165\u003c\/p\u003e \u003cp\u003e10.2 Interest Rate Risk Measurement 167\u003c\/p\u003e \u003cp\u003e10.2.1 Measuring Bond Price Sensitivity to Rates 167\u003c\/p\u003e \u003cp\u003e10.2.2 Duration and Convexity 169\u003c\/p\u003e \u003cp\u003e10.2.3 Convexity and the Mortgage-Backed Securities Markets 171\u003c\/p\u003e \u003cp\u003e10.2.4 Measuring Value-at-Risk for a Bond Position 175\u003c\/p\u003e \u003cp\u003eFurther Reading 176\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Leverage 177\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Defining and Measuring Leverage 177\u003c\/p\u003e \u003cp\u003e11.1.1 Company Financing 177\u003c\/p\u003e \u003cp\u003e11.1.2 Corporate Finance Policy 178\u003c\/p\u003e \u003cp\u003e11.1.3 Margin and Haircuts 179\u003c\/p\u003e \u003cp\u003e11.2 Attractiveness of Leverage and Reaching for Yield 179\u003c\/p\u003e \u003cp\u003e11.3 Leveraged Trades 180\u003c\/p\u003e \u003cp\u003e11.3.1 Carry Trades 181\u003c\/p\u003e \u003cp\u003e11.3.2 Leveraged Investment Funds 184\u003c\/p\u003e \u003cp\u003e11.4 Incentive Alignment and Capital Structure 184\u003c\/p\u003e \u003cp\u003e11.4.1 Leverage and Incentives to Risk Shifting 184\u003c\/p\u003e \u003cp\u003e11.4.2 Debt Overhang 186\u003c\/p\u003e \u003cp\u003eFurther Reading 187\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Liquidity 189\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Funding and Market Liquidity Risk 189\u003c\/p\u003e \u003cp\u003e12.1.1 Market Liquidity 189\u003c\/p\u003e \u003cp\u003e12.1.2 Market Liquidity Stress Events 191\u003c\/p\u003e \u003cp\u003e12.1.3 Funding Liquidity 192\u003c\/p\u003e \u003cp\u003e12.2 Private Liquidity Creation: Commercial Banking 193\u003c\/p\u003e \u003cp\u003e12.2.1 Historical Emergence of Banks 193\u003c\/p\u003e \u003cp\u003e12.2.2 Commercial Bank Liquidity Creation 194\u003c\/p\u003e \u003cp\u003e12.2.3 Commercial Bank Risks 195\u003c\/p\u003e \u003cp\u003e12.3 Private Liquidity Creation: Short-Term Funding 198\u003c\/p\u003e \u003cp\u003e12.3.1 Structure of Collateralized Securities Lending Markets 199\u003c\/p\u003e \u003cp\u003e12.3.2 Repo Markets 201\u003c\/p\u003e \u003cp\u003e12.3.3 Money Market Mutual Funds 204\u003c\/p\u003e \u003cp\u003eFurther Reading 206\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 Portfolio Credit Risk 207\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Credit Portfolios and Default Correlation 207\u003c\/p\u003e \u003cp\u003e13.1.1 Challenges in Portfolio Credit Risk Modeling 207\u003c\/p\u003e \u003cp\u003e13.1.2 Default Correlation 209\u003c\/p\u003e \u003cp\u003e13.1.3 Granularity and Uncorrelated Portfolios 210\u003c\/p\u003e \u003cp\u003e13.1.4 Granularity, Subadditivity, and Credit Value-at-Risk 212\u003c\/p\u003e \u003cp\u003e13.2 Measuring Portfolio Credit Risk 213\u003c\/p\u003e \u003cp\u003e13.2.1 Single Factor Credit Risk Model 213\u003c\/p\u003e \u003cp\u003e13.2.2 Single Factor Model for Portfolios 216\u003c\/p\u003e \u003cp\u003e13.2.3 Portfolio Credit Value-at-Risk 219\u003c\/p\u003e \u003cp\u003eFurther Reading 223\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 Securitization and Structured Product Risk 225\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e14.1 Introduction to Securitization 225\u003c\/p\u003e \u003cp\u003e14.1.1 Function and Design of Securitization 225\u003c\/p\u003e \u003cp\u003e14.1.2 Securitization in the United States 226\u003c\/p\u003e \u003cp\u003e14.2 Securitization Structure 228\u003c\/p\u003e \u003cp\u003e14.3 Credit Risk Measurement of Securitizations 231\u003c\/p\u003e \u003cp\u003e14.3.1 Securitization Loss Scenarios 231\u003c\/p\u003e \u003cp\u003e14.3.2 Securitization Risk Modeling 233\u003c\/p\u003e \u003cp\u003e14.3.3 Credit Value-at-Risk of Securitizations 237\u003c\/p\u003e \u003cp\u003e14.3.4 Risk Analysis and Structuring of Securitizations 238\u003c\/p\u003e \u003cp\u003e14.4 Credit Correlation Trading 240\u003c\/p\u003e \u003cp\u003e14.4.1 CDS Indexes and Standard Tranches 240\u003c\/p\u003e \u003cp\u003e14.4.2 The 2005 Auto Industry Credit Crisis and the “London Whale” 241\u003c\/p\u003e \u003cp\u003eFurther Reading 244\u003c\/p\u003e \u003cp\u003e\u003cb\u003e15 Financial Instability and Financial Crises 245\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e15.1 Defining Financial Crises 245\u003c\/p\u003e \u003cp\u003e15.2 Runs and Liquidity in Financial Crises 246\u003c\/p\u003e \u003cp\u003e15.3 Causes of Financial Crises 251\u003c\/p\u003e \u003cp\u003e15.3.1 Interest Rates, Volatility, and Financial Imbalances 251\u003c\/p\u003e \u003cp\u003e15.3.2 Long-Term Liabilities and Interest Rates 253\u003c\/p\u003e \u003cp\u003e15.3.3 Reaching for Yield 254\u003c\/p\u003e \u003cp\u003e15.4 International Financial Imbalances 258\u003c\/p\u003e \u003cp\u003e15.4.1 Rising International Trade and Global Debt 258\u003c\/p\u003e \u003cp\u003e15.4.2 The Role of the US Dollar 260\u003c\/p\u003e \u003cp\u003e15.4.3 The Cross-Currency Basis 263\u003c\/p\u003e \u003cp\u003e15.4.4 International Financial Imbalances and Stability 264\u003c\/p\u003e \u003cp\u003eFurther Reading 268\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart IV Monetary and Regulatory Policy 269\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e16 Overview of Financial Regulation 271\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e16.1 Structure of Financial Regulation 271\u003c\/p\u003e \u003cp\u003e16.1.1 Financial Regulatory Authorities 271\u003c\/p\u003e \u003cp\u003e16.1.2 Law and Regulation 272\u003c\/p\u003e \u003cp\u003e16.2 Methods of Regulation 273\u003c\/p\u003e \u003cp\u003e16.2.1 Bank Supervision 274\u003c\/p\u003e \u003cp\u003e16.2.2 Regulatory Developments of Recent Decades 275\u003c\/p\u003e \u003cp\u003e16.3 Purposes and Efficacy of Financial Regulation 276\u003c\/p\u003e \u003cp\u003e16.3.1 Rationale of Financial Regulation 276\u003c\/p\u003e \u003cp\u003e16.3.2 Information Problems in Regulation 277\u003c\/p\u003e \u003cp\u003e16.3.3 Incentives and the Efficacy of Regulation 279\u003c\/p\u003e \u003cp\u003eFurther Reading 281\u003c\/p\u003e \u003cp\u003e\u003cb\u003e17 Monetary Policy 283\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e17.1 The Emergence of Monetary Policy 283\u003c\/p\u003e \u003cp\u003e17.2 The Framework of Monetary Policy 284\u003c\/p\u003e \u003cp\u003e17.2.1 Policy Targets and Instruments 285\u003c\/p\u003e \u003cp\u003e17.2.2 Credibility of Monetary Policy 286\u003c\/p\u003e \u003cp\u003e17.2.3 Money Supply Control 287\u003c\/p\u003e \u003cp\u003e17.2.4 Interest Rate Control 289\u003c\/p\u003e \u003cp\u003e17.2.5 The New Keynesian Framework 289\u003c\/p\u003e \u003cp\u003e17.2.6 Alternative Approaches to Monetary Policy 291\u003c\/p\u003e \u003cp\u003e17.3 Monetary Operations in Normal Times 292\u003c\/p\u003e \u003cp\u003eFurther Reading 296\u003c\/p\u003e \u003cp\u003e\u003cb\u003e18 Regulation for Financial Stability 297\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e18.1 The Lender of Last Resort Function 297\u003c\/p\u003e \u003cp\u003e18.1.1 Bagehot’s Rule 297\u003c\/p\u003e \u003cp\u003e18.1.2 Market Maker of Last Resort 298\u003c\/p\u003e \u003cp\u003e18.1.3 Credit Support and Liquidity Support 299\u003c\/p\u003e \u003cp\u003e18.2 The Onset of the Global Financial Crisis 300\u003c\/p\u003e \u003cp\u003e18.3 Financial Stability Policy 302\u003c\/p\u003e \u003cp\u003e18.3.1 Financial Stability and Monetary Policy 302\u003c\/p\u003e \u003cp\u003e18.3.2 Financial Stability Monitoring 304\u003c\/p\u003e \u003cp\u003e18.4 The Problem of Public-Sector Guarantees 304\u003c\/p\u003e \u003cp\u003e18.4.1 Deposit Insurance 305\u003c\/p\u003e \u003cp\u003e18.4.2 Regulation of Money Market Mutual Funds 305\u003c\/p\u003e \u003cp\u003e18.4.3 Too Big to Fail 307\u003c\/p\u003e \u003cp\u003e18.4.4 Emergence of a Too Big To Fail Policy 307\u003c\/p\u003e \u003cp\u003e18.4.5 The Too Big to Fail Subsidy and its Cost 308\u003c\/p\u003e \u003cp\u003e18.4.6 Too Big to Fail and the Regulatory System 309\u003c\/p\u003e \u003cp\u003eFurther Reading 309\u003c\/p\u003e \u003cp\u003e\u003cb\u003e19 Regulation of Capital Funding, Liquidity, and Large Banks 311\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e19.1 Historical Background of the Capital Standards 311\u003c\/p\u003e \u003cp\u003e19.2 Bank Accounting Standards and Regulation 312\u003c\/p\u003e \u003cp\u003e19.2.1 Treatment of Losses 312\u003c\/p\u003e \u003cp\u003e19.2.2 The Banking and Trading Books 314\u003c\/p\u003e \u003cp\u003e19.3 Measuring Risk-Weighted and Adjusted Assets 315\u003c\/p\u003e \u003cp\u003e19.3.1 Risk-Weighted Assets 315\u003c\/p\u003e \u003cp\u003e19.3.2 Leverage Exposure 317\u003c\/p\u003e \u003cp\u003e19.4 Quality and Quantity of Capital 317\u003c\/p\u003e \u003cp\u003e19.4.1 Quality of Capital 318\u003c\/p\u003e \u003cp\u003e19.4.2 Quantity of Capital 318\u003c\/p\u003e \u003cp\u003e19.4.3 Effectiveness and Market Impact of Capital Regulation 319\u003c\/p\u003e \u003cp\u003e19.5 Regulation of Large Banks 321\u003c\/p\u003e \u003cp\u003e19.5.1 Regulatory Capital Ratios for Large Banks 321\u003c\/p\u003e \u003cp\u003e19.5.2 Bail-in-able Liabilities 322\u003c\/p\u003e \u003cp\u003e19.5.3 Regulatory Stress Tests 323\u003c\/p\u003e \u003cp\u003e19.5.4 Resolution of Large Banks 325\u003c\/p\u003e \u003cp\u003e19.5.5 Regulatory Liquidity Standards for Banks 328\u003c\/p\u003e \u003cp\u003eFurther Reading 331\u003c\/p\u003e \u003cp\u003e\u003cb\u003e20 Monetary Policies Since the Global Financial Crisis 333\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e20.1 The Monetary Policy Response to the Global Financial Crisis 333\u003c\/p\u003e \u003cp\u003e20.1.1 Interest on Reserves 333\u003c\/p\u003e \u003cp\u003e20.1.2 Quantitative Easing 334\u003c\/p\u003e \u003cp\u003e20.1.3 Forward Guidance 335\u003c\/p\u003e \u003cp\u003e20.2 Monetary Operations with a Large Balance Sheet 337\u003c\/p\u003e \u003cp\u003e20.2.1 Quantitative Easing and the Soggy Money Market 338\u003c\/p\u003e \u003cp\u003e20.2.2 The Ample Reserves Operating Framework 340\u003c\/p\u003e \u003cp\u003e20.2.3 The Impact of Exit on Funding and Market Liquidity 343\u003c\/p\u003e \u003cp\u003e20.2.4 Money Markets in September 2019 344\u003c\/p\u003e \u003cp\u003e20.3 The Liquidity Paradox and the Banking Turmoil 346\u003c\/p\u003e \u003cp\u003e20.3.1 The Public-Sector Response to the Covid Pandemic 346\u003c\/p\u003e \u003cp\u003e20.3.2 The Rise in Interest Rates and the Financial System 349\u003c\/p\u003e \u003cp\u003e20.3.3 The 2023 US Bank Panic 351\u003c\/p\u003e \u003cp\u003eFurther Reading 354\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix 357\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eA Much of the Probability and Statistics You Need 359\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA1 Probability Distributions and Their Properties 359\u003c\/p\u003e \u003cp\u003eA.1.1 Moments of a Distribution 359\u003c\/p\u003e \u003cp\u003eA.1.2 Quantiles of a Distribution 360\u003c\/p\u003e \u003cp\u003eA.2 Important Distributions 360\u003c\/p\u003e \u003cp\u003eA.2.1 Binomial Distribution 361\u003c\/p\u003e \u003cp\u003eA.2.2 Poisson Distribution 361\u003c\/p\u003e \u003cp\u003eA.2.3 Normal Distribution 361\u003c\/p\u003e \u003cp\u003eA.2.4 Multivariate Distributions 362\u003c\/p\u003e \u003cp\u003eA.3 Stochastic Processes 363\u003c\/p\u003e \u003cp\u003eA.4 Statistical Tests 365\u003c\/p\u003e \u003cp\u003eA.4.1 Samples 365\u003c\/p\u003e \u003cp\u003eA.4.2 Sample Moments 365\u003c\/p\u003e \u003cp\u003eA.4.3 Quantiles of Samples 366\u003c\/p\u003e \u003cp\u003eA.4.4 Central Limit Theorem 367\u003c\/p\u003e \u003cp\u003eA.4.5 Hypotheses 367\u003c\/p\u003e \u003cp\u003eA.4.6 Test Statistics 368\u003c\/p\u003e \u003cp\u003eA.5 Linear Regression Analysis 368\u003c\/p\u003e \u003cp\u003eFurther Reading 370\u003c\/p\u003e \u003cp\u003e\u003cb\u003eB Notation 371\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eC Abbreviations 373\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eReferences 377\u003c\/p\u003e \u003cp\u003eIndex 395\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAllan M. Malz\u003c\/b\u003e has been chief risk officer at several multi-strategy hedge fund management firms. He worked at the Federal Reserve Bank of New York as a researcher and foreign exchange trader, and helped implement the Fed's emergency liquidity programs addressing the global financial crisis.\u003cbr\u003eMalz is an investment consultant and adjunct professor at Columbia University, and the author of \u003ci\u003eFinancial Risk Management: Models, History, and Institutions\u003c\/i\u003e. His work on predicting financial crises and on risk measurement for options has been published in industry and academic journals. He holds a Ph.D. from Columbia and a \u003ci\u003eDiplom\u003c\/i\u003e from Ludwig-Maximilians-Universität München.\u003c\/p\u003e \u003cp\u003eThe financial world has been changing rapidly for over half a century, and even faster amid the crises of recent decades, placing risk and uncertainty at the center of our understanding of finance. The financial system is part of the larger global economy, and is increasingly shaped by monetary, regulatory, and other public policies. In response to these upheavals, \u003ci\u003eContemporary Finance\u003c\/i\u003e offers an approach to financial theory and practice that integrates economics with the workings of institutions. As a textbook or professional reference, this volume represents a unique contribution to understanding the state of finance today.\u003c\/p\u003e \u003cp\u003eThis book's breadth makes it an ideal resource for economics and finance students studying for careers in both the public and private sectors. Topics covered include: \u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cul\u003e\n\u003cli\u003eFinancial markets and institutions, including the basic theory and structure of derivatives markets\u003c\/li\u003e \u003cli\u003eInvestor behavior, the role of uncertainty, and how prices are set in financial markets\u003c\/li\u003e \u003cli\u003eFirm capital structure and leverage\u003c\/li\u003e \u003cli\u003eFinancial risks, including credit and liquidity\u003c\/li\u003e \u003cli\u003eInterest rates, securitization, and short-term lending markets\u003c\/li\u003e \u003cli\u003eFinancial crises and extreme events\u003c\/li\u003e \u003cli\u003eU.S. and international monetary and regulatory policies and their relation to financial stability\u003c\/li\u003e\n\u003c\/ul\u003e \u003cp\u003e\u003ci\u003eContemporary Finance\u003c\/i\u003e provides a real-world overview of key concepts, explained without reliance on advanced mathematics.It is suitable as a sole or supplementary textbook for introductory and specialized finance courses, as well as for finance practitioners.  \u003c\/p\u003e\u003cp\u003e\u003cb\u003ePraise for \u003ci\u003eContemporary Finance\u003c\/i\u003e\u003c\/b\u003e\u003c\/p\u003e \"\u003ci\u003eContemporary Finance\u003c\/i\u003e is another tour de force treatise from Allan Malz, building on but extending the coverage of his earlier book Financial Risk Management to bring it up to date in a world of financial fragility and interconnected complexity. Dr. Malz is a gifted expositor who approaches the subject from the vantage point of both a market risk manager and a scholar of finance theory. I've been working on these topics for four decades and learn something new in every chapter. Moreover, the material I think I knew I now know how to teach thanks to Allan's books.\"\u003cbr\u003e\u003cb\u003e—Richard Clarida,\u003c\/b\u003e Harriss Professor of Economics, Columbia University; Global Economic Advisor, PIMCO; former Vice Chair, Federal Reserve 2018-2022 \u003cbr\u003e\u003cbr\u003e\"\u003ci\u003eContemporary Finance\u003c\/i\u003e covers many key issues in finance. For example, it explains the nature of financial markets, how financial securities are priced, and risk management practices. It concludes with chapters on monetary policy and regulation. An important question for any book used in the classroom is: 'Will students want to keep the book after the course is over?' I am confident that students will continue to want to use \u003ci\u003eContemporary Finance\u003c\/i\u003e once they become practitioners. The book blends theory and practice in an engaging way that is useful for all who work (or would like to work) in finance.\"\u003cbr\u003e\u003cb\u003e—John C. Hull,\u003c\/b\u003e Professor of Finance, Rotman School of Management, University of Toronto \u003cp\u003e\u003cb\u003eAppreciate the complexities underlying the world of finance\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003ci\u003eContemporary Finance\u003c\/i\u003e is a textbook for finance professionals, undergraduates and graduate students. It covers the basic finance theory required to understand the contemporary financial world and builds on that theory in a detailed yet comprehensible way. \u003ci\u003eContemporary Finance\u003c\/i\u003e introduces readers to markets and institutions as well as to the government policy framework within which they operate.\u003c\/p\u003e \u003cp\u003eSuitable for students at all levels, this book connects theories and concepts directly to real-world events and examples. It includes case studies such as the London Whale and GameStop trading episodes, so readers can relate theoretical concepts to reality by studying their relevance to recent market events. With its focus on recent developments and global markets, \u003ci\u003eContemporary Finance\u003c\/i\u003e is an excellent choice for professionals and academics looking to improve or update their understanding of financial economics.\u003c\/p\u003e \u003cp\u003eBy aiming for integration across topics rather than siloed explanations of individual subjects, \u003ci\u003eContemporary Finance\u003c\/i\u003e offers readers a practically applicable foundation of knowledge that will serve them well in public service or the private sector. Today's learners need a contemporary, applied approach to the study of finance—this is it.\u003c\/p\u003e \u003cp\u003e“The field of finance has been changing rapidly over the last decade. Contemporary Finance by Allan M. Malz is the first comprehensive summary of the field to be up-to-date in 2025. Other books force you to choose between comprehensive classic texts missing the latest material, and specialized accounts of some aspects of finance. It blends academic theory with how finance is practiced at the most sophisticated global institutions. Exposition is clear and accessible to students with solid knowledge of college algebra and introductory statistics.” – \u003cb\u003eAaron Brown\u003c\/b\u003e, creator of “Wrong Number!” video series, author of \u003ci\u003eRed-Blooded Risk\u003c\/i\u003e and former managing director and head of financial market research, AQR Capital Management\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47988982317285,"sku":"NP9781394179626","price":95.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781394179626.jpg?v=1761782307","url":"https:\/\/k12savings.com\/es\/products\/contemporary-finance-isbn-9781394179626","provider":"K12savings","version":"1.0","type":"link"}