Timeline for Best simplified way to model volatility in returns of an investment in a risky fixed income asset

Current License: CC BY-SA 3.0

11 events

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Jan 2, 2015 at 17:45	history	edited	Paul	CC BY-SA 3.0	added 844 characters in body
Dec 31, 2014 at 15:43	answer	added	Kyle Balkissoon		timeline score: 2
Dec 31, 2014 at 3:25	comment	added	Paul		YL is the loss in gross yield over a large set of loans in which some have defaulted and some have not. So the gross yield of 100 loans might have been 9% without defaults, but in reality it is 7% because some of them defaulted. So can we assume the loss rate of 2% is the mean of some distribution of yield losses, from which we could extract a variance? I suppose if you assume defaults are independent, you could write that distribution as a product of distributions for each loan, and I suppose each of those could be written as the joint distribution P(default)*P(loss\|default). does that help?
Dec 28, 2014 at 20:32	history	edited	vonjd	CC BY-SA 3.0	edited title
Dec 28, 2014 at 10:28	comment	added	Kyle Balkissoon		I don't understand the question: Are you trying to model the volatility of Loss given DEFAULT? the volatility of the Total Return of the Bond? Isn't YL the loss in yield conditional in defaults. From a pricing perspective your actual yield implies that all investments are worse than the default free yield as if I understand it correctly Ydf is the risk free?
Dec 27, 2014 at 22:21	history	tweeted			twitter.com/#!/StackQuant/status/548966900592828416
Dec 27, 2014 at 14:58	history	edited	Bob Jansen♦	CC BY-SA 3.0	Add Latex remove courtesy
Dec 26, 2014 at 21:04	history	edited	Paul	CC BY-SA 3.0	added 293 characters in body
Dec 25, 2014 at 8:29	history	edited	olaker	CC BY-SA 3.0	typo in the title
Dec 25, 2014 at 4:15	review	First posts
Dec 25, 2014 at 8:29
Dec 25, 2014 at 4:12	history	asked	Paul	CC BY-SA 3.0