This paper presents a framework in which many structural credit risk models can be made hybrid by randomizing the default trigger, while keeping the capital structure intact. This produces random recovery rates negatively correlated with the default probability. The approach is implemented on a...

This paper applies two statistical arbitrage algorithms on the U.S. equities market, using daily historical prices from January 2005 to March 2012. The algorithms construct portfolios using two different frameworks, namely, the Vasicek model and co-integration approach, with a Markov...

[Update: Within four weeks of the original publication of this research report, Risk Magazine reported in its 28th February 2012 issue story titled 'Goodbye VaR? Basel to Consider Other Risk Metrics': "A review of trading book capital rules, due to be launched in March by the Basel Committee on...

Socially responsible investment (SRI) practices are increasingly widely adopted, and moving into mainstream investment activity. Among the suite of instruments available to responsible investors is a fixed-income offering known as a green bond - a specialized bond in which the use of proceeds...

Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well...