Technical paper
Loan portfolio value
Using a conditional independence framework, Oldrich Vasicek derives a useful limiting form for the portfolio loss distribution with a single systematic factor. He then derives a risk-neutral distribution suitable for traded portfolios, and shows how…
A telling scope
The number of technical articles submitted each year to Risk has stabilised at around 90, and a high proportion of them are still about credit derivatives and credit portfolio risk analysis. In fact, in our Cutting Edge pages and behind the scenes we…
The probability approach to default probabilities
Default estimation for low-default portfolios has attracted attention as banks contemplate the requirements of Basel II's internal ratings-based rules. Here, Nicholas Kiefer applies the probability approach to uncertainty and modelling to default…
Pricing with a smile
In the January 1994 issue of Risk, Bruno Dupire showed how the Black-Scholes model can be extended to make it compatible with observed market volatility smiles, allowing consistent pricing and hedging of exotic options
Dynamic asset allocation
Technical papers
Kalibrierung - Markov-Projektion zur Kalibrierung der Volatilität
Der Neueste Stand
Realised volatility and variance: options via swaps
Peter Carr and Roger Lee present explicit and readily applicable formulas for valuing options on realised variance and volatility. They use variance and volatility swaps - or alternatively vanilla options - as pricing benchmarks and hedging instruments…
Expected shortfall - una coda in due parti
APPROFONDIMENTI. RISCHIO DEL PORTAFOGLIO CREDITI
Risk contributions from generic user-defined factors
In this article, Attilio Meucci draws on regression analysis to decompose volatility, value-at-risk and expected shortfall into arbitrary combinations or aggregations of risk factors, and presents a simple recipe to implement this approach in practice
Modelling inflation
Lars Kjaergaard models inflation using a three-factor Gaussian method. This gives a simple description of derivatives linked to inflation and interest rates, and allows for fast evaluation. He then shows how the model can be calibrated
Modelling CDO tranches with dependent loss given default
Guido Giese presents an analytic methodology for pricing collateralised debt obligations tranches including stochastic and dependent loss given default