Questions tagged [risk-models]
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153
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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 ...
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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 ...
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How to get Multivariate Betas from an Estimated EWMA co variance Matrix?
I have a portfolio of 4 assets. I also have returns for 3 indices. I want to get the multivariate betas for these 4 assets-based on these assets. I only have the 7 x 7 covariance matrix estimated by a ...
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Longevity risk modelling
What is Longevity risk, and how to model it under DC and DB pension plans?
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Expected Shortfall and Spectral Risk Measure
Not sure I am understanding spectral risk measures correctly.
Why is there an equal weighting scheme placed on the tail losses in expected shortfall.
Will that no bias the expected value of the loss ...
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Why would there be a positive risk-free rate?
Most financial models include a risk-free rate or risk-free asset.
Why should there be such thing as a positive risk-free rate?
I dont see why an asset would provide a positive (real) return if it ...
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Estimate correlation of time series whose histories differ in length
Very often in quantitative analysis (e.g. calculating portfolio volatility) we have to analyze various time series - mostly returns - whose lenghts differ.
Risk systems usually apply a one-factor ...
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Math basics of Equally-weighted Risk contributions
i'm writing my BA Thesis about "Equally-weighted Risk contributions". Can anyone recommend math books for further understanding of Risk contributions?
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questions on VAR manipulation
The book of Financial Risk forecasting by Danielsson gives the following example about VAR manipulation. I have two questions:
1) If $0> VAR_1 > VAR_0$ , why the following figure plots it as $-...
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What does it mean if $\beta$ is insignificant in the CAPM model?
What can we say about an asset which $\beta$ calculated using the CAPM model (regressing the excess returns of the stock vs excess returns of the market) is insignificant?
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quantiative risk measure how they are implemented in R and their use
So far I have just theoretical knowledge of risk measure and never used them in application. Therefore I have some basic question how risk measures are used in reality and how they are implemented in ...
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How to compare different volatility measures?
I read the Euan Sinclair's book (Volatility trading) in which he suggests different volatility estimators (Close-to-close, Parkinson, Garman-Klass, ...).
I am inquiring about what is the best stock ...
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Minimum PD under Basel II retail asset?
I have been told that under Basel II the minimum PD that one can assign to any portfolio/segment classified under the retail asset class is 0.33%.
But Google searches return nothing and I can't seem ...
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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 ...
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Portfolio risk decreased by increasing share of riskiest asset?
In Parker's The Economics of Entrepreneurship he explains how certain theoretical models predict seemingly bizzare things (e.g. people becoming more risk-averse resulting in them taking riskier jobs) ...
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Asynchronous Data Across Time Zones - RiskMetrics
I'm currently involved with a project to integrate RiskMetrics into our business and one issue we've identified is the treatment of market data timing across time zones. This can have the effect of ...
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What structural model does Reuters use for default probability?
When using Reuters, for each listed company there is credit tab that shows relevant information in terms of credit default. There is also rating class as well as one year default probability. It is ...
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Definition of risk factors for market risk scenario testing
I am doing a research for stress testing in market risk. The usual process I found out for scenario testing is:
Define risk factors upon the portfolio
Define the desired scenarios
Vary the risk ...
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Standard Assumption Terminology
Regulators are starting to analyse (or at least they are talking about it) model assumptions. We all know that too often our assumptions are just in the model documentation. Furthermore, we have no ...
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Benchmarking risk
Given the portfolio return $R$ and the benchmark return $B$, I want to define a risk indicator, measuring the ability to beat the benchmark ($R>B$), given the downside risk taken; the latter not ...
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Gamma vs. Volatility Risk
Original Question: What is the link between Gamma and the Volatility Risk?
It leads me to ask:
- What is the Volatility Risk definition and what are the good practices to measure it?
Thinking about ...
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Risk factors for derivatives on dividends
I consider pricing and risk analysis of derivatives on dividends of the members of equity indices (such as Dow Jones EuroStoxx). There are options but I focus on futures.
What are the main risk ...
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Stochastic modelling of derivatives on dividends
I consider pricing and risk analysis of derivatives on dividends of the members of equity indices (such as Dow Jones EuroStoxx). There are options but I focus on futures.
What are common stochastic ...
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Reasoning behind multiple names for the equivalent risk measures AVaR/ETL/ES/CVaR
Doe's any one know the history behind, or background of the multiple naming conventions for the equivalent risk functions. Different quant authors prefer using different names, does any one know why? ...
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Quantitative risk model for an open real estate mutual fund in Europe
How useful are quantitative techniques for the risk analysis/management of a open real estate fund?
I am thinking about an approach for Europe (US and other markets are probably quite different - ...
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Liquidity in a market risk model based on historical simulation
I would like to model liquidity effects in my risk model which is based on historical simulation. I would like to develop a practical solution that still captures liquidity effects.
Most probably I ...
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Determining portfolio risk return in R given historical data for individual holdings?
Currently we compute portfolio risk and return via our own C# program. Historical data is stored in a SQL database. We want to compute the risk and return parameters - given a portfolio (i.e. not ...
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Multi Factor Credit Risk Models
I am working in the area of building credit risk models. Upto this point, the model I have been focused on using the Asymptotic Single Factor Model, more popularly known as Vasicek Single Factor Model....
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Modelling VIX Futures for risk management
I would like to model VIX futures. The aim is not pricing but risk management. Thus I want to get risk measures like volatility right and be able to accurately calculate correlations when the VIX ...
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Long-term vs short-term strategies \ investing
Suppose most investors have very short investing horizons and use appropriate (for them) strategies, but investor X has a very long horizon. He would like to trade some advantages (early withdrawal ...
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Separated software and physical cash flows modelling and pricing to be used with negative interest rates?
The physical cash presence in the final transactions is one of the issues in the presently observed negative interest rates bonds. Such a situation has historically been modelled within the "liquidity ...
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Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?
Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...
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Is inverted Japanese style curve persistent when negative rates are real / market - observed?
Are the inverted (Japanese style) governmental yield curves being a sign a recession/credit risk or should they be modelled as being due to a lack of liquidity? (...with such curves evolving into a ...
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Proxy for risk in portfolio theory when return can take only two values
I'm trying to adapt tools from portfolio theory for another use, and I have a question about how I might do so.
Suppose that instead of having normally distributed returns, the return $R_i$ is ...
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Discrete time Ho lee model
This is my first question in this forum. I am stuck with my current testing the Ho Lee model. I am having difficulty computing the perturbation factor $\Delta$.
The ho lee model should be completely ...
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Help With Quant Modelling Software [closed]
Im a software developer (freelance) working in investment banking, and I'm looking to improve my CV by gaining a better understanding of the financial quant role and the software used by quants to ...
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Models for measuring insurance risk exposure
I've recently begun working as a quant for a large bank, and one of my first tasks will be to improve the model determining the risk exposure of their insurance portfolio. The portfolio is fairly ...
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performance of historical VaR parameters
An historical VaR measure is parameterized in terms of the confidence level and also number of periods. Specifically, the $\alpha$% T-period VaR is defined as the portfolio loss x in market value over ...
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Performance Attribution : Annualizing alpha & factor return contributions
Let's say I have a factor model which I am using for Performance Attribution. I'd like to separate returns from alpha vs. returns from exposure to various risk factors.
For each date, the factor ...
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Links to the risk model methodologies of the major providers?
There is quite a bit of art in constructing an equity risk model. This paper summarizes some of the key decisions: choice of factors, horizon matching, cross-sectional vs. time-series method, and ...
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What weights should be used when adjusting a correlation matrix to be positive definite?
I have a correlation matrix $A$ for an equity market that is not positive definite. Higham (2002) proposes the Alternating Projections Method, minimising the weighted Frobenius norm $||A-X||_W$ where $...
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Has any research used Bayesian networks to estimate risk factor betas?
Is there any published research on estimating the beta of a security with respect to one or more risk factors via Bayesian networks?
I'd like to see if this is a promising angle of research.
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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 ...
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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 ...
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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 ...
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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. ...
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What research exists regarding implementation of reverse stress testing?
I need to implement a reverse stress testing model (definition here)
I have searched around and cannot find anything substantial on the topic. Does anyone know of any good papers/references ...
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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} \...
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Basel II modelling vs Solvency II modelling?
How do the two modelling frameworks compare? I spent some time developing PD LGD and EAD models for banking portfolios... But I never did insurance modelling project which I suspect is based on ...
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Recommendation for a book on CVA/Credit Risk and PD/LGD/EAD modeling?
I need suggestions for some good books on the following topics:
Credit Value Adjustment (CVA) / Credit Risk
Probability of Default / Loss-Given-Default / Exposure-At-Default modeling
Any pointers on ...
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