The distinctive financial goals and constraints of ultra-high net worth individuals together with their aggregate growth in assets have led to the emergence of “New Institutional” investing, which includes the best practices from institutional investors but incorporates the critical element...

From the inception of the recent financial crisis in July 2007 to the turnaround in March 2009, the MSCI UK Value Investable Market Index (MSCI UK Value IMI) lost roughly 65% of its value, and then recovered half its losses during the remainder of 2009. In this Research Insight, we use the Barra...

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...

We use the Barra Extreme Risk (BxR) model to analyze a US dollar-denominated corporate bond portfolio consisting of 2142 distinct issues. As in the case of equities, we find that the BxR proprietary extreme risk forecasts, xShortfall and xVaR, are higher than value-at-risk and expected-shortfall...

The cumulative return to a levered strategy is determined by five elements that fit together in a simple, useful formula. A previously undocumented element is the covariance between leverage and excess return to the fully invested source portfolio underlying the strategy. In an empirical study...

This paper analyzes a family of multivariate point process models of correlated event timing whose arrival intensity is driven by an affine jump diffusion. The components of an affine point process are self- and cross-exciting, and facilitate the description of complex event dependence...

Quantitative risk management relies on a constellation of tools that are used to analyze portfolio risk. We develop the standard toolkit, which includes betas, risk budgets and correlations, in a general, coherent, mnemonic framework centered around marginal risk contributions. We apply these...

We evaluate several long/short strategies for managing a portfolio of default swaps. The strategies are based on a ranking of credits by residuals, which are the differences between market spreads and spreads generated by the iSpread structural model. Investment grade portfolios for the U.S. and...

We use supervised learning to identify factors that predict the cross-section of maximum drawdown for stocks in the US equity market. Our data run from January 1965 to December 2019 and our analysis includes ordinary least squares, penalized linear regressions, tree-based models, and neural...