9780470697153

Unified Financial Analysis : The Missing Links of Finance

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  • ISBN13:

    9780470697153

  • ISBN10:

    0470697156

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2009-06-22
  • Publisher: Wiley
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Summary

'Unified Financial Analysis' arrives at the right time, in the midst of the current financial crisis where the call for better and more efficient financial control cannot be overstated. The book argues that from a technical perspective, there is no need for more, but for better and more efficiently organized information.The title demonstrates that it is possible with a single but well organized set of information and algorithms to derive all types of financial analysis. This reaches far beyond classical risk and return or profitability management, spanning all risk categories, all valuation techniques (local GAAP, IFRS, full mark-to-market and so on) and static, historic and dynamic analysis, just to name the most important dimensions.The dedication of a complete section to dynamic analysis, which is based on a going concern view, is unique, contrasting with the static, liquidation-based view prevalent today in banks. The commonly applied arbitrage-free paradigm, which is too narrow, is expanded to real world market models. The title starts with a brief history of the evolution of financial analysis to create the current industry structure, with the organisation of many banks following a strict silo structure, and finishes with suggestions for the way forward from the current financial turmoil.Throughout the book, the authors advocate the adoption of a 'unified financial language' that could also be the basis for a new regulatory approach. They argue that such a language is indispensable, if the next regulatory wave - which is surely to come - should not end in an expensive regulatory chaos.'Unified Financial Analysis' will be of value to CEOs and CFOs in banking and insurance, risk and asset and liability managers, regulators and compliance officers, students of Finance or Economics, or anyone with a stake in the finance industry.

Author Biography

Willi Brammertz (Zurich, Switzerland) has worked for 20 years in the field of financial analysis. He is founding partner of IRIS, now part of FRS Global, and father of one of the world’s leading financial analysis systems riskpro™. This system now runs in more than 200 banks in about 20 countries.

Ioannis Akkizidis (Zurich, Switzerland) is Financial Risk Management Consultant and Analyst for IRI S integrated risk management.

Wolfgang Breymann (Zurich, Switzerland) is Professor for Financial Mathematics at the Zurich University of Applied Science Winterthur.

Ram Entin (Zurich, Switzerland) is Financial Risk Management Consultant and Analyst for IRIS integrated risk management.

Marco Rustmann (Zurich, Switzerland) is a Lecturer and Researcher at the Zurich University of Applied Sciences in Risk and Insurance Management He holds a PhD from the University of St Gallen

Table of Contents

List of Figures
List of Tables
Acknowledgments
Introduction.
The Evolution of Financial Analysis.
Bookkeeping
Modern finance
Departments, silos and analysis
The IT system landscape
New approach
Hazards of a single solution
Finding the Elements.
The notion of elements
Elements of financial analysis
Input elements
Financial events and expected cash flows
Risk factors and risk categories
The time dimension
Classification of analysis
Nonfinancial cash flows
The methodology as a reflection
Input Elements
Financial Contracts.
Modeling of financial contracts
Standard contract types
Rules and mechanisms of standard contracts
Examples
Nonstandard contract types
Mapping process
Data quality
Market Risk Factors.
Expectations
Static modelling
Stochastic market models: the arbitrage-free world
Stochastic market models: the real world
Alternative valuation techniques
Further reading
Counterparty.
Exposure, rating and probabilities of default
Data determining gross exposure
Credit enhancements
Credit line and limits
Credit ratings
Further reading 134
Behavior.
Risk sources and behavior
Market-related behavior
Insurance-related behavior
Credit risk-related behavior
Sequence of behavioral effects
Further reading
Costs.
Introduction to cost accounting
Allocating costs to financial contracts
Integration of costs into the general framework
Summary and conclusions
Further reading
Analysis - Liquidation View.
Financial Events and Liquidity
Financial event processing
Examples
Behavioral events
Liquidity reports
Further reading
Value, Income and FTP.
Valuation principles
The big four
Other valuation principles
Special cases
IFRS 32, 39
Funds transfer pricing
Further reading 220
Sensitivity.
Challenges of sensitivity calculation
Interest rate sensitivities from events
Other market sensitivities
Behavioral sensitivities
Sensitivity reports
Risk.
Risk and VaR
Analytical VaR methods
Numerical VaR methods
Expected shortfall
Stress and shock scenarios
Regulatory risk measures
Backtesting
Granularity
Data reduction
Intraday and parallel histories
Further reading
Operational Risk.
Basic indicator and standardized approach
Statistical basis of the advanced measurement approach
Operational value at risk
Further reading 290
Analysis - Going-Concern View.
General Mechanisms.
Market conditions and general risk factors
New financial production
Behavior and counterparty
Cost
Balancing
Appendix: aggregation
Single contract level and performance
Contract aggregation
Banks.
Chart of accounts and portfolio structures
Forecasting volume and characteristics
Adding market forecast, counterparty information and behavior
Analysis elements
Life Insurance.
Chart of account
The life contract
Forecasting new production
Analysis elements
Non-life Insurance.
Chart of account
The non-life contract
The reinsurance contract
Forecasting new volume and characteristics
Analysis elements
Nonfinancials.
Financial and nonfinancial corporates
The nonfinancial model
Analysis elements
Corporate valuation
Outlook And Conclusions.
The Financial Laboratory.
Risk and performance measurements
Example of an economic risk report
Optimization
Consistency
Further reading
Towards a Unified Financial Language.
The need for a unified financial language
Structure of a unified financial language
New finance, new regulation
Index
Table of Contents provided by Publisher. All Rights Reserved.

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