相关论文: Forecasting Portfolio Risk in Normal and Stressed …

We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such…

If the probability of default parameters (PDs) fed as input into a credit portfolio model are estimated as through-the-cycle (TTC) PDs stressed market conditions have little impact on the results of the capital calculations conducted with…

The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…

Value at Risk (VaR) and stress testing are two of the most widely used approaches in portfolio risk management to estimate potential market value losses under adverse market moves. VaR quantifies potential loss in value over a specified…

We discuss a weighted estimation of correlation and covariance matrices from historical financial data. To this end, we introduce a weighting scheme that accounts for similarity of previous market conditions to the present one. The…

In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…

In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…

We investigate the possible drawbacks of employing the standard Pearson estimator to measure correlation coefficients between financial stocks in the presence of non-stationary behavior, and we provide empirical evidence against the…

Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…

We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…

The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…

We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…

We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…

We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation…

The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…

Financial correlations play a central role in financial theory and also in many practical applications. From theoretical point of view, the key interest is in a proper description of the structure and dynamics of correlations. From…

Credit risk stress testing has become an important risk management device which is used both by banks internally and by regulators. Stress testing is complex because it essentially means projecting a bank's full balance sheet conditional on…

We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…

For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…

We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before…