Questions tagged [risk-models]
The risk-models tag has no usage guidance.
160
questions
0
votes
1
answer
120
views
PCA risk modelling
Been doing loads of reading about PCA, FA and SVD but still fail to understand the fundamentals of how PCA links with factor analysis in the context of risk modelling. Here is where I'm stuck:
Given a ...
- 1
0
votes
0
answers
22
views
Cs01 computation for TRS with underlying single name bond
What’s the cs01 calculation formula for TRS with underlying bond for a single corporate issuer? Thanks in advance!
- 1
0
votes
0
answers
19
views
Approximating Distortion Risk Measures by the Sum of their CVaRs
Can you please cite me to the paper that prove the theorem that any distortion risk measure can be approximated using the sum of its CVaRs?
Someone said it is Axiomatic Characterization of Distortion ...
2
votes
2
answers
184
views
What is the proper way to derive risk definitions from utility functions?
In typical mean-variance analysis, the risk-adjusted relative value of an individual asset takes the general form
$\frac{\mu}{\sigma^2}$,
with further weighting and normalization depending on the ...
- 73
0
votes
0
answers
47
views
PCA and OLS regression to transform to interest rate risk? [duplicate]
I’ve been working on different interest rate risk transformation methods for swaps and was interested in implementing PCA & OLS regression. I’m looking to bucket my exposure in all tenors to ...
0
votes
0
answers
40
views
How to create custom factors based on an existing factor model?
I'm searching some literatures or books illustrating how to create custom factors based on an existing factor model.
For example, given an existing Barra factor risk model, if I want to add some ...
- 41
1
vote
0
answers
110
views
What is the informational content of the volatility skew?
The option-implied volatility is well-known as a measure for the risk-neutral future expected risk for the underlying asset. However, the market prices of options (across different strikes) imply ...
- 1,595
0
votes
1
answer
76
views
How should I create a Risk measurement Variable?
I have clients who take loans (Advances) weekly. The way that they repay the advance is after 3 weeks when their goods are sold, using the sales proceeds of the goods. But if the goods don't sell for ...
- 11
2
votes
1
answer
480
views
Can PCA be used to transform a ladder of interest rate risk?
The context
For traders/market makers on interest rate swaps desks, it is essential to have a model that transforms risk from its most complex representation (i.e. a ladder of every tenor) into a less ...
- 439
0
votes
0
answers
68
views
equities hedging betas for a cross-sectional risk model
This question is on equities risk models. I would like to know how to define betas when using a cross-sectional regression approach, rather than the time series approach. My goal is beta hedging of a ...
- 11
0
votes
1
answer
107
views
Probability Theory: Maximizing the difference between distribution functions
Given a sample of observations $X$, by changing a parameter $p$ we can divide $X$ into two subsamples $X_1$ and $X_2$ (this division is done in a non-trivial way which is nonetheless irrelevant to ...
- 21
0
votes
2
answers
136
views
Risk mapping for Brazilian IPCA bonds [closed]
On Jorion's 'Value at Risk' chapter about risk mapping, interest rate swaps are decomposed in a portfolio of forward contracts so they can be mapped into risk factors.
I'm trying to implement this for ...
- 525
1
vote
0
answers
128
views
Minimizing variance of a long short equity portfolio in practice
I understand the finance 101 explanation of how to minimize variance of a long-short portfolio using a covariance matrix. I also know that it doesn't really work because the covariance matrix is ...
- 191
1
vote
0
answers
94
views
Market risk factor proxies examples [closed]
I am reading some corporate documentation, including the notion of market risk factor proxy. Could you provide some examples of risk factors and their proxies?
What I find obvious is the observable ON ...
- 145
1
vote
0
answers
35
views
Is "extreme CVaR" (CVaR from extreme value theory) elicitable or conditionally elicitable with some other statistical mapping (like VaR)? [closed]
I am not able to find loss function (scoring function) extreme CVaR (CVaR from extreme value theory) which is a conditionally elicitable statistical mapping (conditioned on VaR).
In this regard, can ...
- 11