# Questions tagged [risk-management]

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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### Standard market risk platform Value-at-Risk (VaR)

if possible, could you share publicly available methodological guides/pamphlets or post links to specialised websites which give sufficient detail of the basic assumptions, algorithms and possible ...
30 views

### Calculating performance decay of a strategy

Came across this thread which basically advises t-test for difference in means across periods to calculate whether our edge is deteriorating. The catch being that this test will probably not be ...
65 views

### Estimating VaR of bond due to changes in the US yield curve

I am attempting estimate the 99% 10-day VaR of an investment grade bond due to changes in the US yield curve. The data provided is the daily prices of the bond over time. In addition I have the Daily ...
106 views

### Correlation for Trading vs. Risk Management

Assume a portfolio that contains some asset A and that I am contemplating hedging my delta in A by taking a position in asset B. I would determine how much of B to buy/sell based on the linear ...
16 views

### Variable transformation for probit regression model

I am trying to understand a credit rating model which is used in my company to assess company customers with large exposures. This model is provided by Moody's and assigns grades (similar to Aaa, Aa1, ...
73 views

### Equivalence of Standard Deviation and Variance as a risk measure - WRONG?

In Modern Portfolio Theory, I often see that people seem to view Standard Deviation and Variance as equivalent. Example from Markowitz himself: "Thus far I have used the standard deviation ...
77 views

### From annualized Sharpe Ratio to number of daily losses

I have seen a few statements that link a particular annualised Sharpe Ratio to the likely frequency of 'loss day' across a given period: e.g. "A annualised Sharpe Ratio of X, implies the ...
34 views

### Do equity mutual funds typically have industry-level diversification constraints? [closed]

For instance, are there limits to how concentrated a portfolio in terms of industry allocation? If so, where can I find such information about the constraints each fund has?
99 views

### Risk measurement of multicallable bonds

Assume you have bought a multicallable bond where the issuer has the right to redeem the notional at various dates, e.g. a $10$ yr maturity, $5$% coupon yearly and each year one call date. Next, ...
63 views

### How to calculate contributions to the granularity adjustment

In the Basel pillar 2 framework a granularity adjustment is introduced. While the capital requirements in pillar 1 do not take concetrations into account, this is meant to be covered with this ...
10 views

### How to model run-off ratio for non-defined maturity deposit?

I'm trying to model run off ratios for different deposit products as well as how long it takes to lose all deposits, would anyone please suggest any methodology? In addition, would I be able to define ...
35 views

### Implications of modeling operational risks without frequency distribution

When modeling operational risk, the Loss Distribution Approach (LDA) is widely used. Usually, we model the loss frequency distribution and the loss severity distribution and then aggregate both to ...
57 views

### Exercise on Delta-Neutal-Hedging

Suppose you have three positions in the following assets in euros: long on 10.000 calls (maturity T = 3 months, strike= 0.55, Delta (1 call) =0.533), short on 210000 calls (maturity T = 3 months, ...
73 views

### Resources for Bayesian methods

I will be joining a risk management firm in a few months, and I was wondering if some of you could help we with resources on certain methods. Some of the things that I would be called upon to work on ...
61 views

### Optimal withdrawal rate based on alpha and drawdown

My trading returns is about 50% monthly(alpha) and maximum drawdown is about 20%. Is there a mathematical way to define the optimal withdrawal rate X%(say when profit level reach y%) to avoid risk of ...
412 views

### Deep Reinforcement Learning in Quant Finance?

I've been struggling to find engaging papers on the application of deep reinforcement learning in quantitative risk analysis, portfolio management, algorithmic trading and/or options pricing. What are ...
26 views

### What is the shadow cost of capital for a bank?

With regard to banks RWAs (risk weighted assets), what does it mean a trade leads to a positive shadow cost of capital?
76 views

### how do we use portfolio optimization to hedge an existing portfolio?

I am working on a risk management project and want to create a custom hedge portfolio to add on to an existing portfolio. I am wondering how do we treat the existing portfolio in the optimization ...
41 views