Product Description

Macrofinancial risk analysis


Dale Gray and Samuel Malone


Macrofinancial Risk Analysis provides a new and powerful framework with which policymakers and investors can analyze risk and vulnerability in economies, both emerging market and industrial. Using modern risk management and financial engineering techniques applied to the macroeconomy, an economic value can be placed on the risks posed by inter-linkages between sectors, the risk of default of different sectors on their outstanding debt obligations quantified, and the value ex-ante of guarantees to private sector entities by the government calculated. This book guides the reader through the basic macroeconomic and financial models necessary to understand the framework, the core analytical tools, and more advanced contributions that will be of interest to researchers. This unique synthesis of ideas from finance and macroeconomics offers several original contributions to the theory of financial crises, as well as a range of new policy options for governments interested in achieving a better tradeoff between economic growth and macro risk.

Product Details

• Amazon Sales Rank: #305463 in Books
• Published on: 2008-05-19
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 362 pages

Review
"...compelling" (Risk, November 2008)

From the Inside Flap
Macrofinancial risk analysis

"The publication of Gray and Malone's book marks a major tipping point in the history of the science of financial economics. Since its origins in the work of Black, Merton, and Scholes in the early 1970s, the option-pricing approach to risk analysis has found broader and broader application throughout the fields of economics and risk management. Finally it is being applied to the biggest risk-management issues faced by nations: the prevention of financial crises that can cause widespread economic hardship and dislocation for millions of people. I expect that this excellent book will be closely studied by policymakers and concerned citizens everywhere."

-Zvi Bodie, the Norman and Adele Barron Professor of Management, Boston University School of Management

From the Back Cover
Macrofinancial risk analysis

Dale Gray and Samuel Malone

Macrofinancial Risk Analysis provides a new and powerful framework with which policymakers and investors can analyze risk and vulnerability in economies, both emerging market and industrial. Using modern risk management and financial engineering techniques applied to the macroeconomy, an economic value can be placed on the risks posed by inter-linkages between sectors, the risk of default of different sectors on their outstanding debt obligations quantified, and the value ex-ante of guarantees to private sector entities by the government calculated. This book guides the reader through the basic macroeconomic and financial models necessary to understand the framework, the core analytical tools, and more advanced contributions that will be of interest to researchers. This unique synthesis of ideas from finance and macroeconomics offers several original contributions to the theory of financial crises, as well as a range of new policy options for governments interested in achieving a better tradeoff between economic growth and macro risk.

Customer Reviews

Reading the future financial risks... and opportunities
I enjoyed reading Gray and Malone's Macrofinancial Risk Analysis. As an economist with some background in finance, I think this book is a milestone contribution to bridge conceptual and empirical gaps between modern finance and economics when applied to financial risk analysis and management on a broad scale. Gray and Malone do a great job on laying out an original, clever and comprehensive analysis of the most relevant economy and system-wide financial risks transfers, identifying the most important financial inter-linkages between sectors marked-to-market balance sheets. The analytical framework they develop, based on forward-looking market information and the evaluation of cross-sector contingent claims, provides a very robust methodology for assessing and managing financial risk factors, vulnerabilities, transfers and final exposures at any level of aggregation. But the authors do not stop there. They also provide all along the book countless examples of practical applications of the methodology. Particularly interesting are the applications of the methodology to better understand the key aspects of the 2007- ? subprime / international financial crisis and its transmission across economic regions, markets, financial systems and specific sectors -i.e. banks, firms, sovereigns or households. The book will certainly provide powerful and innovative tools for anyone involved in understanding financial risk transfers, either from a national or supra-national, market or individual institution perspective, and I expect will become a landmark of future academic and empirical work in the field.

Cristián Echeverría
Head, External Financial Stability Group, Central Bank of Chile.