Questions tagged [risk-models]
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13
questions
16
votes
12
answers
170k
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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 ...
- 169
22
votes
4
answers
6k
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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. ...
- 13.5k
2
votes
1
answer
551
views
Can PCA be used to transform a ladder of interest rate risk?
The context
For traders/market makers on interest rate swaps desks, it is essential to have a model that transforms risk from its most complex representation (i.e. a ladder of every tenor) into a less ...
- 439
25
votes
3
answers
7k
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What is the necessary level of Econometrics-Know-How for a quant
It seems quants increasingly use econometric models at work.
As someone who has sold his soul to probability theory and stochastical analysis I would like to catch up.
What are the econometric tools ...
- 3,377
22
votes
3
answers
4k
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Cleansing covariance matrices via Random matrix theory
I am exploring de-noising and cleansing of covariance matrices via Random Matrix Theory. RMT is a competitor to shrinkage methods of covariance estimation. There are various methods expressed usually ...
- 13.5k
15
votes
1
answer
2k
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Quantifying climate change risk
I am looking for resources on applicable and practical solutions for estimation and quantifying climate change risk from asset owners perspective (for example, a portfolio of equity, fixed income, and ...
- 1,860
3
votes
1
answer
1k
views
Get distribution for aggregate loss using Monte Carlo
I am given two data sets containing dates and losses (in some currency).
Given a distribution for the amount of losses and an (a,b,0) distribution for frequency of losses, how can I use Monte Carlo ...
- 923
18
votes
3
answers
6k
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} \...
- 593
13
votes
2
answers
3k
views
Cluster analysis vs PCA for risk models?
I built risk models using cluster analysis in a previous life. Years ago I learned about principal component analysis and I've often wondered whether that would have been more appropriate. What are ...
- 9,877
11
votes
1
answer
1k
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Is volatility for the next day forecastable? To any extent?
In a more general way: is there
1) a methodological approach to quantify the correctness of a model that produces a probability distribution for the, say, S&P 500 index return for the next ...
- 153
6
votes
2
answers
643
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 ...
- 13.5k
5
votes
5
answers
2k
views
Physical commodity trading quantitative risk return model
I am very new to commodities, I was previously in portfolio management/optimization (Black Litterman Markowitz etc). I am now a Buy-Sell analyst for Petrochemicals, and need to understand the basic ...
- 193
1
vote
1
answer
95
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Compute moments of aggregate loss using Monte Carlo
Spin-off from here.
Richard referred to me an article that tells me how to get parameters of a translated gamma distribution to which I should consider fitting simulated aggregated loss values.
The ...
- 923