Correlation
Relaxing the assumption of conditional independence in an asymptotic single risk factor model
Within the framework of dynamic credit provisioning and stress testing, this paper shows how conditional correlation impacts an asymptotic single risk factor model.
Quantum cognition machine learning: financial forecasting
A new paradigm for training machine learning algorithms based on quantum cognition is presented
Finland’s Ilmarinen goes back to basics
Talking Heads: Once one of the few funds that would enter bank risk recycling trades, recent overcrowding has seen it pivot to listed equities
Supply chain decoupling fires up alpha focus at BofA
Talking Heads: Stock dispersion sees funds gross up on long/short baskets, while US structured notes come of age
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
Bonds will cushion equities in election volatility – Lombard Odier
August showed old risk models can be trusted ahead of voting day, says investment manager’s macro chief
ETF dispersion set for election revival
Sector-based approach to popular vol trades boasts cheaper entry cost than classic version, proponents argue
The post-Archegos risk model rebuild begins… slowly
Following regulatory prodding, banks start to overhaul counterparty risk models. A flurry of new research on the topic may aid the effort
Correlation breakdowns, spread positions and central counterparty margin models
The authors investigate correlation behavior during adverse market conditions and the potential impact on CCP margins, finding that such breakdowns appear to be more common than expected.
Collapse of correlation fails to stem zeal for dispersion
New analysis suggests immensely popular relative value strategy may have more upside
‘Fear gauge’ within expectations, some say
Several options specialists dismiss claims that structured products are distorting the Vix
Quants are using language models to map what causes what
GPT-4 does a surprisingly good job of separating causation from correlation
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
Estimating the correlation between operational risk loss categories over different time horizons
The authors propose and demonstrate the value of a model with which mathematical techniques can be applied to analytically calculate means, variances and covariances more accurately than Monte Carlo simulations.
What have we learned from 20 million historical US stock data?
The author offers a statistical characterization of the US stock market from January 3, 1995 to June 11, 2021.
Equitable lobbies for concentration charge on riskier ABS
“Ultra-high correlation of losses” between lower-rated tranches requires new regulation, insurer says
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
Commerz’s market RWAs up 9% on EBA technical update
Updated list of closely correlated currencies removes lower fund requirements from 197 pairs
How banks can avoid bad haircuts on hedge fund trades
HSBC quant makes case for looking at collateral and funding rates in concert
How Man Numeric found SVB red flags in credit data
Network analysis helps quant shop spot concentration and contagion risks
‘Spectacular’ vol disconnect ‘ominous’ for risk assets
Historic divergence has caught the eye of Boaz Weinstein and others