Bubble Value at Risk: A Countercyclical Risk Management Approach, Revised Edition

"Bubble Value at Risk offers a critical rethinking of some of the deficiencies in the calculation of risk capital. I particularly liked the more applied wisdom scattered throughout the text. Here is a practitioner explaining how things really work, or for that matter, don't work in the real world. These remarks will definitely open the eyes of the more academic researcher."
—Paul Embrechts, Director of RiskLab, ETH Zurich

"Reading Bubble Value at Risk is an intensive master class in risk management. As a busy risk management practitioner, I found Bubble Value at Risk extremely worthwhile in that Wong, with the theoretic detail of an academic but with the intuition of a practitioner, very efficiently surveys the evolution of financial risk management thought since the credit crisis. The book is well written, organized, thought-provoking, and to the point. After constructively critiquing pre-crisis risk management for its conceit that it could precisely model extreme events, Wong pragmatically breaks with risk dogma and introduces the concept of Bubble Value at Risk as a more prudent means of allocating sufficient capital to buffer tail risk in light of the fact that tail risk is inherently unknowable. The book is simply a very good use of time for anyone fighting the guerrilla war with risk."
—David P. Belmont, CFA and Chief Risk Officer, Commonfund

"John Maynard Keynes is famous for many things, including this quote on bankers: 'A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.' This quote, originally found in The Consequences to the Banks of the Collapse of Money Values (1931), describes very accurately the robotic use of the Value at Risk concept at many financial institutions. Max Wong skewers the conventional wisdom on Value at Risk in this original book from a very talented and experienced market participant. Mr. Wong illustrates the mathematical problems with Value at Risk with many worked examples and insights from the 2007-2011 credit crisis. He suggests an alternative to the conventional wisdom, ' Bubble Value at Risk,' which addresses many of the shortcomings in conventional VaR calculations that were starkly revealed during the credit crisis. We highly recommend this candid and enlightening book to any risk analyst who finds himself surrounded by a large contingent of 'sound bankers.'"
—Donald R. van Deventer, PhD, Chairman and Chief Executive Officer, Kamakura Corporation (www.kamakuraco.com), and coauthor of Advanced Financial Risk Management, 2nd Edition

"Wong establishes his reputation as an inventive risk manager with the innovative idea to express expected shortfall (also called expected tail loss, or conditional VaR) in terms of previous price levels. This book also has some interesting ideas on financial regulatory reform and should be attractive to non-quant readers seeking knowledge of the pitfalls of Value at Risk, as it is usually measured."
— Professor Carol Alexander, Subject Lead, Finance and Accounting, School of Business, Management and Economics, University of Sussex