Tagged Questions
2
votes
0answers
78 views
Benchmarking risk
Given the portfolio return $R$ and the benchmark return $B$, I want to define a risk indicator, measuring the ability to beat the benchmark ($R>B$), given the downside risk taken; the latter not ...
2
votes
0answers
154 views
Gamma vs. Volatility Risk
Original Question: What is the link between Gamma and the Volatility Risk?
It leads me to ask:
- What is the Volatility Risk definition and what are the good practices to measure it?
Thinking about ...
2
votes
0answers
191 views
Long-term vs short-term strategies \ investing
Suppose most investors have very short investing horizons and use appropriate (for them) strategies, but investor X has a very long horizon. He would like to trade some advantages (early withdrawal ...
9
votes
1answer
312 views
Models for measuring insurance risk exposure
I've recently begun working as a quant for a large bank, and one of my first tasks will be to improve the model determining the risk exposure of their insurance portfolio. The portfolio is fairly ...
7
votes
0answers
193 views
performance of historical VaR parameters
An historical VaR measure is parameterized in terms of the confidence level and also number of periods. Specifically, the $\alpha$% T-period VaR is defined as the portfolio loss x in market value over ...
4
votes
1answer
736 views
Performance Attribution : Annualizing alpha & factor return contributions
Let's say I have a factor model which I am using for Performance Attribution. I'd like to separate returns from alpha vs. returns from exposure to various risk factors.
For each date, the factor ...
3
votes
2answers
10k views
How to calculate unsystematic risk?
We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ...
4
votes
2answers
325 views
Choice of prior as a shrinkage target in portfolio construction?
There's various research showing how priors such as the minimum variance portfolio turn out to be a surprisingly effective shrinkage target in portfolio construction.
The sell point of these priors ...
8
votes
2answers
478 views
When should you build your own equity risk model?
Commercial risk models (e.g., Barra, Axioma, Barclays, Northfield) have evolved to a very high level of sophistication. However, all of these models attempt to solve a very broad set of problems. ...
10
votes
3answers
765 views
Is Conditional Value-at-Risk (CVaR) coherent?
When the risk is defined by a discrete random variable, is CVaR a coherent risk measure? I stick to the following definition of CVaR:
$$ CVaR_\alpha(R) = \min_v \quad \left\{ v + \frac{1}{1-\alpha} ...
3
votes
5answers
850 views
Recommendation for a book on CVA/Credit Risk and PD/LGD/EAD modeling?
I need suggestions for some good books on the following topics:
Credit Value Adjustment (CVA) / Credit Risk
Probability of Default / Loss-Given-Default / Exposure-At-Default modeling
Any pointers ...
6
votes
2answers
1k views
What does it mean to modify the factor loadings of a credit risk model?
I came across an example where a well-known weakness of a credit risk model was dealt with by augmenting some of the existing risk factors via increased factor loadings. This made the the model more ...
16
votes
2answers
464 views
How do macro funds manage risk and model asset returns? Do they use factor models?
Some of the largest funds in the world are entirely macro-based: Soros, Brevan Howard, Bridgewater. They trade across asset classes, and seemingly with very concentrated allocations. What type of risk ...
