Extended-lister
Showing 441 - 450 of 499 entries
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Research Report
Financial markets in the aftermath of the terrorist attackThis paper summarizes market events since September 11, 2001 and compares them with stress events of the past few years. The weeks following the terror attack displayed the typical patterns of market crisis behavior. At the same time, the crisis on this occasion was shorter and more muted than in previous stress events that originated in the financial markets. These events underscore again the importance of portfolio diversification.
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Research Report
Mark-to-Market, Oversight and Sensitivity Analysis of CDOsWe present a framework that can be used to value CDOs and model the risk characteristics of each tranche as the collateral pool evolves. A consistent valuation and oversight framework for CDOs could accelerate the development of a secondary market. An oversight framework can also be used by buy-and-hold investors, since mark-to-market changes can signal potential realized losses. To illustrate our approach, we present a case study of the impact that various changes in the collateral pool...
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Research Report
Risk and expectations in the crude oil market in recent monthsOil prices have risen sharply over the past year. Aclose analysis using prices of derivatives on crude oil shows, however, that the market assigns a considerably higher likelihood to a sharp drop in the price of oil over the next few months than to a sharp rise. This market view has been tempered somewhat in recent weeks.
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Research Report
Importance Sampling for Credit Portfolio SimulationRisk measurement relies heavily on Monte Carlo simulation. We describe a variance reduction technique, importance sampling, that focuses simulation on scenarios in the adverse tail of the return distribution. Importance sampling can greatly enhance the speed and accuracy of credit portfolio statistics without biasing them.
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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
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.