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Results tagged with risk-management
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user 36636
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.
0
votes
Accepted
Risk measurement of multicallable bonds
(Bonds with more than 1 posisble call date are not very exotic. This answer applies to a bond with 1 European call date as well.)
That depends on what risk measures you want (or are required to) calcu …
- 13.2k
4
votes
Pragmatic question about use of Stress Tests/metrics
Your process of calculating the impact of market stress scenarios sounds more manual / less automated than best industry practices. The disadvantages of having manual processes incclude:
it's expensi …
- 13.2k
1
vote
Value-at-Risk theory papers
I have read the article "Computation of the corrected Cornish–Fisher expansion using the response surface methodology: application to VaR and CVaR" by Charles-Olivier Amédée-Manesme, Fabrice Barthélém …
- 13.2k
3
votes
What is the best way to hedge a position with negative interest rate?
Hedging is meant to reduce some unwanted exposure, e.g. to interest rates.
If company A (corporate borrower) takes out a loan with floating-rate loan or issues a floating-rate note (for example, the …
- 13.2k
1
vote
Taking into account liquidity risks when calculating volatility
The term liquidity risk is used to mean two different things. There are many books and web pages about liquidity risk in the sense of asset liability management, over-simplifying - the fear that while …
- 13.2k
1
vote
Code (Python or R) references for operational risk models (AMA/COM)
I googled and found https://github.com/TommasoBelluzzo/BaselTools . It says:
BaselOP
The tool can be run by executing the BaselOP.m script. The underlying calculations are based on the SMA model defi …
- 13.2k
1
vote
How to set VaR and other Risk Limits
Market risk limits are part of a risk appetite framework, which includes appetite for othe risk stripes, like non-financial (operational), reputational, and model risk.
A good paper on setting up a ri …
- 13.2k
1
vote
the difference between CS01 and RS 1%
There is no standard nomenclature, but:
Often "CS01" means the P&L impact of credit spreads changing by 1 bp - the credit spread delta. It's often used as a risk measure by credit trades. Some people …
- 13.2k
2
votes
VaR backtesting. Reasons for over- and underestimation of value at risk estimates?
Here are some suggestions/random thoughts based on my own past experience debugging unexpected VaR values. They may help with Expected Shortfall (ES) as well.
Maybe the markets really behaved differen …
- 13.2k
19
votes
Quantifying climate change risk
Here are some resources that I found useful when learning about this subject, in which I'm very interested. (Some may be more general ESG than just just climate.)
Citigroup. Environmental and Social …
- 13.2k
2
votes
Estimating VaR of bond due to changes in the US yield curve
Something like the following is likely to be acceptable to whoever looks at your VaR methodology.
Convert your historical (clean) price to yields of your bond (remember to use the right historical set …
- 13.2k
1
vote
What to do if certain parameters are not market observable?
If I know some relevant fundamental ratios for these two equities, I might take inspiration from MSCI's predicted beta, which to me means that I would look for other equity pairs whose correlations I …
- 13.2k
1
vote
Using LGD (Loss Given Default) in the trading of bonds
One problem with using LGD is that unless the bond issuer is on the verge of default, you don't have a good estimate of what the defaulted bond would be worth. Sometimes it is not clear even for some …
- 13.2k
4
votes
Accepted
Filtered Historical Simulation VaR for swaps
Let us suppose for concreteness that the 10y swap rate is 0.5% today and was 7% a year and and 6.5% a "year minus a day" ago...
reprice the swaps for each historical scenario and calculate returns as …
- 13.2k
1
vote
Value At Risk Modelling for electricity market with negative prices
Suppose you have a series of historical prices $P_t$, indexed by time, and the current price $P_\mathrm{now}$, and we want to see what the price would become if the price now had changed similarly to …
- 13.2k