Showing 9731 - 9740 of 9,883 entries
Research PaperAvalanches Earthquakes and Stock Market Crashes
One of the most important and successful concepts in finance is the stochastic process. Although stochastic processes originated from a study of Brownian motion in physics, they have since been applied to many areas in finance including options valuation, equity risk modeling, and fixed income risk modeling. Recently, another concept in physics, the theory of self-organized criticality, has generated much excitement. This theory, which has already been applied to such diverse areas as...
Research PaperRiskMetrics Monitor - RiskMetrics Monitor 3Q96
Accounting for "Pull to Par" and "Roll Down" for RiskMetrics cashflows How accurate is the Delta-Gamma Methodology? VaR for basket currencies
Research PaperFixed Income Active Strategies
This article investigates how, conceptually, to succeed at fixed income active management. Drawing on the basic framework for active management established in "Seven Quantitative Insights Into Active Management: Insight Two" (this issue), we will discuss how to succeed at active management, and then make some empirical observations about fixed income managers. The key to active management is the information ratio. Given typical information ratios, fees and expenses, and active risk...
Research PaperThe Global Equity Model vs. the Emerging Markets Model: A Comparison
The new, expanded GEM model with broader emerging markets coverageespecially in Eastern Europe and Asiais generally more appropriate for emerging markets portfolio managers than Barra's DOS-based Emerging Markets Model. GEM and EMM both produce similar relative risk characteristics and risk forecast results for an emerging market portfolio with minimal exposure to the extra EMM risk index, liquidity. The tracking error in both versions is similar, with the largest...
Research PaperImplied Prepayments
Valuation of mortgage-backed securities (MBSs) using option-theoretic methods presents some puzzles. First, the option-adjusted spreads (OASs) of passthroughs are significantly larger than the spreads of agency debt, even though they are comparable credits. Second, the OASs of interest-only (IO) and principal-only (PO) strips are typically very different from those of the passthroughs they were created from - IOs generally have large positive OASs while POs have negative OASs. These results...
Research PaperSeven Quantitative Insights into Active Management, Part 2
Information ratios determine value added.
Research PaperRiskMetrics Monitor - RiskMetrics Monitor 2Q96
An improved methodology for measuring VaR that allows for a more realistic model of financial return tail distributions A value-at-risk analysis of currency exposures underscoring the limitations of standard VaR when underlying market return distributions deviate significantly from normality Estimating index tracking error for equity portfolios
Research PaperConstruction of a South African Risk Model
What drives stock prices in South Africa? Is it the price of gold? Is it the movement of the rand relative to the dollar or sterling? Is the size of a company an important variable? Is South Africa a more volatile market than other equity markets? Answers to these and many other questions can be found by building a risk model of South African equities. In 1995, Barra embarked upon and completed a project to build a model to predict and explain the risk of investing in South African...
Research PaperMacroeconomic Risk Perspective
Macroeconomic risk analysis can provide an intuitive framework for equity portfolios. Traditionally, investors and researchers have considered the macroeconomic approach, the fundamental approach, and the statistical approach to risk modeling to be mutually exclusive. The conventional wisdom is that if you want the forecasting accuracy of the fundamental approach, you cannot also have macroeconomic intuition. This is incorrect. Barra is now developing analytics to provide macroeconomic...
Research PaperSpeaking in Style: Insights for Managers
John Rabold Portfolio managers are responsible for all aspects of the portfolios they manage, and so they must use tools which use asset-level information. While their clients often monitor a portfolio in less detail, accounting systems, trading systems, and risk management systems all take into account the specific securities held and weights within each. Recently, fund sponsors and investment consultants have adopted returns-based style analysis because it is simple and concise in concept...