Quantitative analysis
A forward-looking adjustment
Cutting edge: Operational risk
The impact of PD/LGD correlations on credit risk capital
Guido Giese applies econometric estimates of correlations between default rates and loss given default rates to modern credit portfolio models to quantify their impact on the calculation of credit risk capital
Omega portfolio construction
The omega risk-adjusted performance measure with Johnson distributions accountscomprehensively and non-discretionarily for the first potentially persistent moments includingskewness and kurtosis. The Johnson-omega ratio thus overcomes the shortcomings of…
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Quant analysis
NDF
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Bayerische Landesbank
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CBA Vita
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Banco Urquijo
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Replication of flexi-swaps
Ingmar Evers and Farshid Jamshidian describe a relatively new product known as a flexi-swap and discuss its application in securitisation. A flexi-swap gives a counterparty an option to amortise the interest rate swap at an accelerated pace. They show…
Rating properties and their implications for Basel II capital
Internal ratings
Common interests
Interest rates
La Caixa
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Sanpaolo IMI Group
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Quant analysis
Barclays
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Understanding variations in the risk of multi-strategy portfolios
Investors spend a great deal of time and effort setting a thoughtful risk budget for their portfolio,only to see all too frequently that the targeted risk will be missed by a wide margin when theinvestment process gets started. In this article, Gang…
Jumps as components in the pricing of credit and equity products
The equity and credit markets have become increasingly integrated over recent years. This has increased the need for models and tools that allow traders to hedge their risk simultaneously in the two markets. Here, Daniel Bloch presents an approach that…
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Quant analysis
AGF
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West LB
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BBVA
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FinecoVita
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Market models for CDS
In August 2004, Risk published an article on the pricing of credit default swap (CDS) options entitled A measure of survival by Phillip Schönbucher. Here, Damiano Brigo provides an alternative derivation of the CDS option pricing formula based on Cox
Estimating default correlations using a reduced-form model
Credit risk : Cuttingedge