The identification, assessment, and prioritization of risks, followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

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1answer
13 views

CDS spread scenarios from historical market data

I'm searching for information on the best way to generate scenarios to be used in VaR or ES calculations, for CDS spreads. Given that we need significant historical data in order to achieve a decent ...
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1answer
38 views

Clarification of The Market Portfolio

I am currently reading John C. Hulls' "Risk Management and Financial Institutions" and came across the following passage related to the efficient frontier and combinations of risky and risk-free ...
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1answer
97 views

Spectral and distortion risk measures

Is there any difference between the spectral and distortion risk measure? Or is it just a different name for the same kind of risk measure?
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66 views

Large deviations theory and extreme value theory

I'll enter into details of both, sooner or later, but for the moment I'm concerned about the differences (and relationships, if any) between these two theories. Can someone give me a brief, but still ...
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0answers
26 views

Portfolio Analytic Metrics for Portfolios with Serially Correlated Returns

I just read Andrew Lo's paper from 2002 "The Statistics of Sharpe Ratios" and am wondering if anyone knows of any other papers/docs/resources that explore the impact of serially correlated returns on ...
3
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0answers
51 views

Modelling the Cost of Risk

I would like to read something about the cost of risk. Could anyone recommend some reference about how it is calculated or modelled?
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1answer
82 views

Risk Manager must-know list

What are the products, concepts, and models a risk manager must know? I'm not looking for an exhaustive list, but rather a general list as the one in Paul & Dominic's Guide To Quant Careers: ...
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2answers
102 views

Stochastic process theory question

*S follows a process $dS= mSdt + oSdz$ where m and o are constant. What is the probability followed by $ Y=(Se)^{(r-t)} $. If S follows a process $ dS= k (b-S) dt + oSdz $ where k, b, o are ...
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3answers
120 views

Hedge Fund risk management on a daily basis

Since Hedge Funds/Fund of Funds report on a monthly basis usually within 10 days after the month end, monitoring and managing (hedging) potential risks is quite a difficult task. Having done some ...
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0answers
17 views

Portfolio construction for signals of varying time scales?

Wondering if anyone is aware of any research on combining/portfolio construction of signals on different time scales. For example, if I have a trading signal (alpha) that generates trades every hour ...
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0answers
31 views

Lambda in RiskMetrics for fixed income

What is the default lambda proposed in RiskMetrics for fixed income?
0
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1answer
46 views

Currency risk USD>EUR>EGP

Seeking input on hedging risk on USD to Euro with a 3rd component of payroll issued in Egyptian Pounds. We are a US corp invoicing a Germany entity in Euro with massive payroll being paid in Egyptian ...
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1answer
52 views

Basic Metrics for Option Trading Limits

Imagine a trading house that trades options in a modest way, and is looking for simple but effective metrics over which trading option limits will be set. Some random thoughts: 1) VaR is not ideal, ...
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42 views

Value at risk computation for a diffusion process

Given a hypothetical process $X_{t}$ defined by : $$ X_{t} = \int_0^t b_{s} ds + \int_0^t W_{s} ds + \sum_{i=1}^{N_{t}} \gamma_{T_{i}} Y_{i}$$ $ W_{t}$ is a standard brownian motion, $b_{t} ...
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0answers
27 views

Commercial Vendors for Risk Management and Portfolio Optimization and Performance Attribution

So this question is directly about companies such as Axioma, Barra, Northfield, and etc. that provide risk management, portfolio optimization, and performance attribution related services. I want to ...
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1answer
21 views

What are pre and post stress capital?

Fed papers make reference to a post-stress and pre-stress capital. I can't find definitions of these online, but from the context (below), it sounds like the post-stress capital is the estimated ...
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0answers
46 views

How to calculate break-even point of merged plant/company?

The question goes like this : ...
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1answer
114 views

Where can I find data source for structural models?

I am starting a project to implement the Black-Merton-Scholes model from this book in R. However, I am looking for, ideally free, data sources. Still I have access to a Bloomberg terminal. Can you ...
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0answers
17 views

Multiple similar values simulation

Perhaps some of you came across the following task that I am trying to automate for @RISK, VOSE or other simulation software? I have a question as we are trying to use the software to estimate the ...
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3answers
62 views

What information should be delivered to the client so they have enough information to manage their exchange rate risks? [closed]

The client can be a CFO or CEO. The information can indicators, charts, graphs, statistics, ratios, etc. I know the VaR is one of them.
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4answers
500 views

Stressed Value at Risk vs Value at Risk

Just read some materials about SVaR. Is there only holding period that changes in comparison to VaR methodology?
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0answers
38 views

Want to understand the links and relationship between all the risk metrics?

For Example : if Risk weighted asset (RWA) increased or decreased this month, which other risk metrics could have influenced RWA to increase or decrease. Also in different situations like, upward ...
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0answers
49 views

how best to equalize individual pair risk in a portfolio of stock pairs?

I am building a portfolio of stock pairs in which each pair is individually hedged via beta/hedge ratio adjustment. I am looking for a method to ensure that I am taking the same risk in each pair that ...
2
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0answers
45 views

The best way to generate market scenarios [closed]

What general approaches could you recommend for modeling spot rates(for different maturities) and forward rates?(eg for LIBOR) I need to generate scenarios for term-structure of interest rates. What ...
2
votes
1answer
37 views

Expected Shortfall alternative formulation

Define: $$q_\alpha(F_L)=F^{\leftarrow}(\alpha)=\inf\lbrace{x\in \mathbb{R}\mid F_L(x)\geq \alpha\rbrace}=VaR_\alpha(L)$$ I want to prove that: $$ES_\alpha = ...
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1answer
107 views

How to perform risk budgeting for non-linear portfolios?

I am using this question to compute optimal weights following a risk budgeting approach. The problem is I am using non-linear portfolios (options,equity,fixed income,fx). What I am looking for is ...
6
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2answers
235 views

Is there any research on pyramiding techniques of entering/exiting a trend?

I am looking for any research about optimal strategies for gradually building (scaling in) positions inside a trend as well as optimal gradual exit strategies on pullbacks/reversals to minimise ...
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0answers
39 views

Performance analysis for a changing portfolio

I am trying to do a performance analysis of an investment in five different funds (A to E). I am investing a fixed amount at each fund (say 10m in A, 20m in B, 10m in C, 20m in D, 10m in E) but the ...
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2answers
122 views

Extracting Default probability from a single CDS

I have to find the CDS's default probability using the simplest Poisson Process (intensity constant). I'm wondering how to get this estimate if I have only a CDS with maturity 5years. If I had ...
3
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0answers
30 views

conferences for credit portfolio managers

What are worth conferences for credit portfolio managers? I appreciate your recommendations! PS:I am aware that this question is not the typical quant.SE question, BUT I couldn`t find reliable ...
3
votes
1answer
64 views

VaR calculation accuracy/comparison/effectiveness through different R packages

My question is what would be the better( in terms of estimation accuracy) method of VaR calculation among below two:, also any small code snippet will be great as a starting point for me. 1st method: ...
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1answer
97 views

Do I need simulink to model the risks of an option portfolio

I wish to buy Matlab Home and learn to model the risks of a derivatives portfolio and then stress test it. So I am guessing I will need : Stochastic calculus Linear algebra Stats/Probability Some ML ...
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1answer
42 views

How to effectively hedge a Fixed-Term deal in a foreign currency?

Assume my firm is based in USD and agrees with some counterparty to buy, at time $T$, some quantity $Q$ of asset $A$ for a fixed price $K$. Assume also that $A$ prices and $K$ are denominated in EUR. ...
2
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0answers
159 views

Modified duration in multi-currency portfolio

I was thinking about how to figure aut duration for portfolio of bonds denominated in different currencies… I would like to compare sensitivity of portfolio to shift of yield with competitive ...
5
votes
2answers
127 views

Why is the variance of a portfolio a quadratic form?

I was reading about MPT http://en.wikipedia.org/wiki/Modern_portfolio_theory and notices that the total variance of a portfolio is $x' \Sigma x$, where x is the weighting of the assets and $\Sigma$ ...
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1answer
119 views

References for PD / LGD estimates of low-default portfolios

Any recommendations or reading sources for estimating individual PDs and LGDs for a set of low-default assets (souvereigns, investment grade corporates)? Since observing no defaults at all, regular ...
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1answer
203 views

Machine learning to build top 3 price scenarios over n days

I have a time series of closing prices for a given stock. I would like to formulate possible future scenarios for the price. My intention is not to use these "likely" scenarios to take any position. ...
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3answers
231 views

New ways of communicating risk

One of the scapegoats of the financial crisis was value at risk. Still communicating risks effectively to clients is a big challenge and hugely important (also to keep your job as a quant!) In this ...
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0answers
28 views

Hypothetical actuary working with a life company

If you are an actuary with a life company, how would you show that your capital assessment complies with the rules of Solvency II (or related regulations) that stipulate the minimum of capital that ...
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1answer
177 views

Difference between Risk avoidance and Risk transfer

I was hoping some could explain the two terms namely, risk avoidance and risk transfer. Also, can a risk be avoided by transferring it?
2
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0answers
104 views

Empirical distribution function of overlapping time series data

If we model asset return volatility for periods of more than one (say more than one day) there is the square-root rule which holds true under some assumptions. The situation is more tricky if we look ...
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0answers
116 views

continuous dividend yield - european option

Can someone help with following task? You need to use a 5-period forward binomial model to price options, which is constructed by specifying the up and down moves as follows: u = exp {(r − δ) · h + ...
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0answers
22 views

Random Matrix Theory in Risk Management [duplicate]

How can we apply Random Matrix Theory(RMT) in Risk Management for estimation risk of portfolio consisting of correlated assets?
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0answers
39 views

Invoice Discount pricing model

I was wondering whether there exist pricing models in particular for Invoice Discounting contracts and short-term financing solution where credit risk plays a major role. Specifically, assuming that ...
2
votes
2answers
119 views

Works of Nassim Taleb

I am looking to find the list of math/statistics papers of Nassim Taleb. However the google scholar page only seems to show popular articles. I know that he's famous for his theory of randomness and ...
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0answers
91 views

Create Markets Bubble Indicator

I am trying to replicate a Bubble Indicator described here. The indicator is strictly based on calculating the regularity of price behavior to determine herding in multiple time frames. I tried the ...
0
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1answer
86 views

What are good online resources for credit portfolio managers?

I am aware that this question is not the typical quant.SE question, BUT I couldn`t find any site/forum/wiki, where credit portfolio managers hang out to share their experience and their methods. ...
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1answer
102 views

What are the different Credit Portfolio Management models and what are their advantages?

CreditMetrics, RiskMetrics(Algorithims), etc. are all different risk methodologies used by many banks. However, what are their advantages/disadvantages? I would appreciate your replies!
2
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2answers
78 views

Does anyone know where I can find a free efficient frontier tool, or an informative and legitamate/academic graph of the efficient frontier?

I'd like to build a portfolio based upon modern portfolio theory and I'd like to find a tool I can use to calculate the proper mix of asset classes. Can anyone help with this? I think a good ...
1
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1answer
118 views

What is the difference between these two Expected Shortfall definitions?

I have come across different ways expected shortfall is defined. e.g. $$ES_a(X)=\frac{1}{1-a}\int_a^1VaR_b(X)db$$ and $$ES_a(X)=\frac{1}{a}\int_0^aVaR_b(X)db$$ e.g. on Wikipedia's article. Are these ...