# 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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### Construct a butterfly interest rate portfolio to eliminate PCA exposures

I have data from 2012 to 2016 for interest rates whose term range from 2 month to 30 years, a total of 10 Principal components can be calculated. Then I want to construct a portfolio, WFLY = w_1 *5Y ...
1k 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 ...
226 views

### Looking for non-GAUSS Code for Thiery Roncalli's book on Risk Parity and Budgeting

I am going through the book 'Introduction to Risk Parity and Budgeting' by Thierry Roncalli (2013). The author provides software for the various concepts illustrated in the book, but it is all done in ...
1 vote
125 views

### Calculation of Total Credit Risk Capital % but seeing lower capital percentage for higher risk band. Is there any correction required?

I am trying to calculate the Total Credit Risk capital % for my learning purpose as given below. Assuming adding 1 single loan with different pds. i have noticed one point in the table and have two ...
112 views

### Roll down for floating rate notes

is it correct to say that floating rate notes (FRNs) have no roll-down for a time horizon as it is interest risk free?
2k views

### Risk management tools for long term Gamma/Vega sellers subject to margin calls

TL;DR: if you're a retail investor and you systematically sell long-term vertical spreads while staying Delta-neutral, your main risk comes from Vega and the Gamma of opening gaps that can throw you ...
1 vote
786 views

### Manually calculating and backtesting VaR and CVaR from DCC-GARCH R

I estimated a GARCH fit to the log returns of three series (CAC 40, a french real estate index and french T10 bond yield series) using rugarch. I then manually ...
100 views

### Liquidity Stress Test of Investment fund - Liquidation tracking error

It is my first message on this board, I have hesitated a few days before bothering you with my struggles, but I've seen a lot of very knowledgeable and patient people here willing to help out. I ...
149 views

272 views

### Basic Metrics for Option Trading Limits

Imagine a trading house that trades options, and is looking for simple but effective metrics over which trading option limits will be set. Which ones should it choose? Some random thoughts: VaR is ...
1 vote
47 views

### Calculate fund size given risk limit?

I was listening to a podcast and this guy mentioned the following (literally): The entire group is probably running 800 million at risk. So I'm going to say like call that like a, if you think of ...
2k views

### the difference between CS01 and RS 1%

Please tell me the difference between CS01 and RST 1% (Relative spreads tightening by 1%) and how these two are used to monitor the credit flow traded product's exposures. Why would you use the spread ...
1 vote
352 views

### Practical risk management on snowball autocallable portfolios

I am new to exotic options pricing and risk management. The scenario that I encounter is that the market maker sells snowball autocallable products(accumulated coupon) every trading day and has to ...
113 views

### Using LGD (Loss Given Default) in the trading of bonds

Do you use the LGD as a risk management tool when trading credit cash bonds? Or it's more for trading the loan product.
172 views

### FX Risk Reversal - RHS/LHS - Strike adjustments

I was wondering why ppl use the wordings being „rhs/LHS“ right hand side / left hand side when having an risk reversal for example Long EUR Call / USD Put and Short EUR Put / USD Call. Do they refer ...
51k views

### How does the "risk-neutral pricing framework" work?

I've struggled for a long time to understand this - What is this? And how does it affect you? Yes I mean risk neutral pricing - Wilmott Forums was not clear about that.
217 views

### Why not calculate Kelly using semivariance? As w Sortino

Kelly is calculated as mu / sigma^2. If we remove our highest performing returns from our calculations this actually increases our Kelly leverage, which does not make sense to me. A less profitable ...
1 vote
73 views

### Market risk factor proxies examples [closed]

I am reading some corporate documentation, including the notion of market risk factor proxy. Could you provide some examples of risk factors and their proxies? What I find obvious is the observable ON ...
1 vote
101 views

### MonteCarlo Value At Risk for futures portfolio

I wanted to ask, suppose I have a portfolio of futures of gasoline and other oil products eg ULSD (Ultra Low Sulphur Diesel), WTI (West Texas Intermediate) for different months. I want to compute the ...
456 views

### Filtered Historical Simulation VaR for swaps

I am trying to understand how to calculate FHS VaR for a portofolio of vanilla swaps. I think I understand the main ideas behind FHS VaR and how to implement it for other assets such as equities. I ...
1 vote
2k views

### Market risk FRTB: calculation of Vega risk charge

I recently started working on a project that requires me to deal with the new market risk standard issued by the Basel Committe: https://www.bis.org/bcbs/publ/d457_faq.pdf I am trying to calculate ...
221 views

### What is Leverage?

What would you consider leverage? I know this may sound like a basic question but I have spoken with several industry professionals with a significant amount of experience and all of them have a ...
1 vote
526 views

### What are "df", "t", and "p" in these sharpe ratio related estimates?

I am looking at some sharpe ratio related estimates and have not seen Sharpe stats broken down this way before. I don't know what is meant by df, t, and p. Can someone explain that to me? Thank you!...
1k 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 ...
608 views

### ES not elicitable

Expected Shortfall is not elicitable as some papers have pointed out. That simply means that there is no scoring function that elicits ES. My question is, does this imply that Expected Shortfall ...