Extended-lister
Showing 101 - 110 of 152 entries
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Research Report
Comparing Methods To Approximate Mortgage-Backed Security VaRWhile the framework for pricing mortgage-backed securities (MBS) is well documented, there has been little research on developing and comparing computationally efficient methods for calculating VaR of these instruments. In this article, we focus on interest rate risk and its effect on prepayment risk, and we investigate five approaches to approximating the VaR of an MBS portfolio due to interest rate risk. Our results show that when we weigh the trade-off between accuracy and computation...
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Research Report
Estimating issuer-specific risk for corporate bondsIn this article we measure the issuer-specific risk of corporate bonds using the CreditGrades model. Expected losses on corporate bonds are calculated using the CreditGrades cumulative default distribution function. A better estimate of expected losses allows for a better estimate of total risk, because we can express the price of a corporate bond as its risk-free value minus expected losses. We also use our issue-specific risk framework to decompose the total risk of a bond...
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Research Report
A Primer on Vega Risk Measurement in RiskManagerA primer on vega risk measurement in RiskManager Vega risk measurement is a new feature of RiskManager. Accurate vega risk measurement depends on both implied volatility data and the measurement algorithm. This article discusses our approach to vega risk measurement, reviewing both the data inputs and the methodology, with illustrations drawn from the foreign exchange markets. We present and interpret sample value-at-risk reports and stress tests showing the risk impact of changes in implied...
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Research Report
Estimation of zero-coupon curves in DataMetricsDataMetrics is modifying its technique for estimating zero-coupon interbank and government benchmark curves. The new algorithm is employed together with additional synchronized input data to deliver better-quality curves. The modified technique assumes the instantaneous forward rate is a constant between the maturity dates of observable interest rates. Together, the flat forward technique and new input data increase pricing and risk measurement accuracy, particularly at the...
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Research Report
Risk Budgeting for Corporate Bond PortfoliosUsing the corporate bond data base described in the previous paper, we present a case study explaining how to create and monitor a risk budget for a portfolio of U.S. corporate bonds. The analysis is based on a simple model that takes into account changes in the term structure of Treasury rates and credit spreads, and the residual risk or spread of each individual security.
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Research Report
Market developments in the first half of 2002We review events in global markets over the past half-year from a risk viewpoint. The main feature of market behavior over the past half year has been a large rise in volatility, occasioned by an increase in both uncertainty and risk aversion. The prices of many assets, from stock indexes to currencies, also changed significantly over the period. We present some highlights here that illustrate the changes in risk and risk aversion.
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Research Report
Developing an Equity Factor Model for RiskThis paper gives a survey on equity factor modeling and how it relates to other risk modeling techniques. The theory is illustrated by means of an empirical study.
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Research Report
Measuring the Quality of Hedge Fund DataThis paper discusses and investigates the quality of hedge fund databases. The accuracy of hedge fund return data is taken for granted in most empirical studies. We show however that hedge fund return time series often exhibit peculiar and most likely “man-made” patterns, which are worth to be recognized. We develop a statistical testing methodology which can detect these patterns. Based on these tests, we devise a data quality score...
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Research Report
Inflation Risk Across the BoardInflation markets have evolved significantly in recent last years. In addition to stronger issuance programs of inflation-linked debt from governments, derivatives have developed, allowing a broader set of market participants to start trading inflation as a new asset class. These changes call for modifications of risk management and pricing models. While the real rate framework allowed us to apply the familiar nominal bond techniques on linkers, it does not provide a consistent...
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Research Report
Volatility Forecasts and At-the-Money Implied VolatilityThis article explores the relationship between realized volatility, implied volatility and several forecasts for the volatility built from multiscale linear ARCH processes. The forecasts are derived from the process equations, and the parameters set according to different risk methodologies (RM1994, RM2006). An empirical analysis across multiple time horizons shows that a forecast provided by an I-GARCH(1) process (one time scale) does not capture correctly the dynamic of...