Showing 4341 - 4345 of 4,345 entries
Research PaperFactor Models and Fundamentalism, MSCI Barra Newsletter, Summer 2006
Guy Miller compares Fundamental, Statistical, and 'Hybrid' Equity Factor Risk models. He discusses when the different types work best and when they are likely to fail in risk management and portfolio construction. When statistical factors are used to extend a fundamental factor model, we see modest improvements in risk forecasting. The improvement in portfolio optimization seems even slighter and should be applied only with caution
Research PaperDynamic Volatility and its Implications for Portfolio Management
A discussion on the implications of changing volatility levels on active and passive portfolio management. In the Summer 2005 Horizon Newsletters, we examined the sources of cross-sectional volatility in the Japan market. We extend the study to Europe and the US market and simulate the impact of dynamically changing volatility levels on active portfolio risk. We show that the optimal level of tracking error, the size of active exposures, and the optimal number of securities vary wildly with...
Research PaperExploring Default Swap Spread Variation
We assess the effectiveness of the Barra Default Probability (BDP) model in explaining the cross-sectional variation of Credit Default Spreads. In order to establish the usefulness of the BDP model in forecasting real-world defaults, we test it against historical default experience. We find that the model shows good default discriminatory power relative to agency ratings.
Research PaperA Prepayment Model for the Danish MBB Market
We developed an Implied Prepayment model to calculate spread values and effective Durations for Danish Mortgage Backed Bonds (MBB). By using an implied prepayment model, constructed by fitting a generic functional form to market prices of liquid Danish MBB, we take the market price of prepayment risk into account and produce consistent results. Since only current pricing data are used as a model input this approach does not require access to a historical database of prepayment data. This will...
Research PaperSummer 2006
Equity Risk Modeling: A Comparison of Factor ModelsExplaining Default Swap VariationA Prepayment Model for the Danish MBB MarketDynamic Volatility and Its Implications for Portfolio Management