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Choros-Tomczyk, Barbara; Härdle, Wolfgang; Okhrin, Ostap - 2013

Modelling the dynamics of credit derivatives is a challenging task in finance and economics. The recent crisis has shown that the standard market models fail to measure and forecast financial risks and their characteristics. This work studies risk of collateralized debt obligations (CDOs) by...

Persistent link: https://www.econbiz.de/10009763975

Common risk factors of infrastructure firms

Ben Ammar, Semir; Eling, Martin - 2013 - This version: 05/07/2013

The risk of infrastructure investments is driven by unique factors that cannot be well described by standard asset class factor models. We thus create a nine-factor model based on infrastructure-specific risk exposure, i.e., market risk, size, value, momentum, cashflow volatility, leverage,...

Persistent link: https://www.econbiz.de/10010410032

Optimality and diversifiability of mean variance and arbitrage pricing portfolios

Pesaran, M. Hashem; Zaffaroni, Paolo - 2009

This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using a general dynamic factor model, as the number of assets diverge to infinity. It extends the results obtained in the literature for the exact pricing case to two other cases of...

Persistent link: https://www.econbiz.de/10003910456

Modelling and forecasting liquidity supply using semiparametric factor dynamics

Härdle, Wolfgang; Hautsch, Nikolaus; Mihoci, Andrija - 2009

current state of the market, we show that the recent liquidity demand has the strongest impact. In an extensive forecasting … analysis we show that the model is successful in forecasting the liquidity supply over various time horizons during a trading …. -- Limit order book ; liquidity risk ; semiparametric model ; factor structure ; prediction …

Persistent link: https://www.econbiz.de/10003881566

Modelling and forecasting liquidity supply using semiparametric factor dynamics

Härdle, Wolfgang; Hautsch, Nikolaus; Mihoci, Andrija - 2009

current state of the market, we show that the recent liquidity demand has the strongest impact. In an extensive forecasting … analysis we show that the model is successful in forecasting the liquidity supply over various time horizons during a trading …. -- Limit Order Book ; Liquidity Risk ; Semiparametric Model ; Factor Structure ; Prediction …

Persistent link: https://www.econbiz.de/10003887437

What derives the bond portfolio value-at-risk : information roles of macroeconomic and financial stress factors

Tu, Anthony H.; Chen, Cathy Yi-Hsuan - 2016

This paper first develops a new approach, which is based on the Nelson-Siegel term structure factor-augmented model, to compute the VaR of bond portfolios. We then applied the model to examine whether information contained on macroeconomic variables and financial shocks can help to explain the...

Persistent link: https://www.econbiz.de/10011437907

Copula-based factor model for credit risk analysis

Lu, Meng-Jou; Chen, Cathy Yi-Hsuan; Härdle, Karl Wolfgang - 2015 - This version: August 20, 2015

A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper proposes to incorporate a state-dependent recovery rate...

Persistent link: https://www.econbiz.de/10011313568

Outperforming naive diversification using stock level information

Berrada, Tony; Coupy, Sebastien - 2015

We construct mean-variance portfolios using a factor model approach. We show the importance of portfolio allocation for large unbalanced equity data sets using the full CRSP database. We compare the performance of our portfolio construction methodology to the 1/N naive diversification strategy,...

Persistent link: https://www.econbiz.de/10011412212

Factor models for portfolio selection in large dimensions : the good, the better and the ugly

De Nard, Gianluca; Ledoit, Olivier; Wolf, Michael - 2018 - This version: December 2018

This paper injects factor structure into the estimation of time-varying, large-dimensional covariance matrices of stock returns. Existing factor models struggle to model the covariance matrix of residuals in the presence of time-varying conditional heteroskedasticity in large universes....

Persistent link: https://www.econbiz.de/10011868115

Estimation risk and shrinkage in vast-dimensional fundamental factor models

Vlodrop, Andries C. van; Lucas, André - 2018

We investigate covariance matrix estimation in vast-dimensional spaces of 1,500 up to 2,000 stocks using fundamental factor models (FFMs). FFMs are the typical benchmark in the asset management industry and depart from the usual statistical factor models and the factor models with observed...

Persistent link: https://www.econbiz.de/10011949129