Research and Insights
Articles by Stacy L.cuffe
Allocating Assets in Climates of Extreme RiskResearch Report | Apr 6, 2011 |
In this article, we extend the standard paradigm for portfolio stress testing in two ways. First, we introduce a structured set of tools that enable investors to envision and administer extreme scenarios. We show how to take account of historical and hypothetical covariance matrices in scenario construction, and we provide examples that demonstrate the substantial impact of doing so. In short, the risk climate can and should be incorporated in a stress test. Second, we provide a means to...