Showing 41 - 50 of 124
Wrong way risk can be incorporated in Credit Value Adjustment (CVA) calculations in a reduced form model. Hull and White (2012) introduced a CVA model that captures wrong way risk by expressing the stochastic intensity of a counterparty's default time in terms of the financial institution's...
Persistent link: https://www.econbiz.de/10013032955
We discuss a practical and effective extension of portfolio risk management and construction best practices to account for extreme events. The central element of the extension is (expected) shortfall, which is the expected loss given that a value-at-risk limit is breached. Shortfall is the most...
Persistent link: https://www.econbiz.de/10013146966
We gauge the return-generating potential of four investment strategies: value weighted, 60/40 fixed mix, unlevered and levered risk parity. We have three main findings. First, even over periods lasting decades, the start and end dates of a backtest can have a material effect on results; second,...
Persistent link: https://www.econbiz.de/10013104083
Climate change has far-reaching implications for the global economy and is increasingly being recognized by investors as a long-term investment theme. As more investors take note of companies that are well positioned to handle climate change, a common factor may account, in part, for the share...
Persistent link: https://www.econbiz.de/10013292945
Persistent link: https://www.econbiz.de/10015192031
Portfolio risk forecasting has been and continues to be an active research field for both academics and practitioners. Almost all institutional investment management firms use quantitative models for their portfolio forecasting, and researchers have explored models' econometric foundations,...
Persistent link: https://www.econbiz.de/10012684398
Maximum drawdown, the largest cumulative loss from peak to trough, is one of the most widely used indicators of risk in the fund management industry, but one of the least developed in the context of probabilistic risk metrics. We formalize drawdown risk as Conditional Expected Drawdown (CED),...
Persistent link: https://www.econbiz.de/10010793636
This paper describes an empirical study of shortfall optimization using Barra fundamental factors. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth, Momentum, etc.). We show that minimizing shortfall...
Persistent link: https://www.econbiz.de/10010751538
This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth, Momentum, etc.). We show that minimizing shortfall generally...
Persistent link: https://www.econbiz.de/10008836703
Risk-only investment strategies have been growing in popularity as traditional in- vestment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that...
Persistent link: https://www.econbiz.de/10010691251