Empirically testing a bond portfolio hedging model is usually carried out when proposing a new model or to compare several existing models using real data. However, there are many methodological choices to be made during such exercise, which are usually made either implicitly or without...

This paper applies regression analysis to investigate the fundamental factors of the variation of CDS index tranches. The sample comprises daily data on the tranche premia of the European iTraxx and North American CDX index from the start of the market in summer 2004 to January 2008. I estimate...

Duration and DV01 (dollar duration) measure price sensitivity and provide the basic risk measure for bonds, swaps, and other fixed income instruments. When valuing instruments off a yield curve, duration and DV01 naturally extend to a vector of partial DV01s or durations (key rate durations) and...

Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits plus a 3x6 months Forward Rate Agreement (FRA); that...

We present an affine arbitrage-free dynamic term-structure model based on a representation of instantaneous forward rates as sum of exponentials. The model, which is Gaussian and belongs to the class of Heath-Jarrow-Morton-type models, is intuitively appealing as a suitable linear combination of...

In this study, we investigate the tail dependency between bank stocks in China and 35 common risk factors. We measure univariate and multivariate conditional tail risk probabilities. The evidence indicates that tail events from risk factors in the banking, security trading, real estate, and...

Many central banks adopt an active investment style for reserve management. This paper discusses various possible enhancements to active management tools and processes to generate extra returns in an increasingly challenging environment. The proposed framework is based on an affine model, which...

In this paper, we establish a comparison between one of the most traded financial derivatives in the markets, the so-called catastrophe bonds (abbreviated as cat bonds) and the corporate bonds. In the first section, we start from a brief definition as well as some basic concepts. In section two,...

This paper proposes a set of indicators relevant for the risk characteristics of covered bonds, as based on granular publicly available transparency data. The indicators capture various aspects of cash flow risks related to the issuer, the cover pool and the payment structure. They offer unified...

This literature overview conducts a systematic study of how the climate related risks from global warming may affect financial markets. The climate related risk is divided into three subcategories, the environmental uncertainty, the economic climate risk and the climate policy risk, which all of...