Technical paper/Asset management
Market reaction to price changes and fat-tailed returns
Market reaction to price changes and fat-tailed returns
Stress testing with fully flexible causal inputs
Stress testing with fully flexible causal inputs
Market-consistent equity risk premiums
The capital asset pricing model used to determine excess return for a given risk level and allocate assets typically uses historical data, which can be a poor predictor of risk. By adapting the model to be consistent with market-implied distributions,…
Market-consistent equity risk premiums
Market-consistent equity risk premiums
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Mean reversion pays, but costs
Mean reversion pays, but costs
A dynamic model for leveraged funds
Guido Giese derives a model for the performance and Sharpe ratio of leveraged and inverse index funds that follow a dynamic leveraged trading strategy, that is, they are rebalanced on a daily basis to ensure a constant degree of leverage with respect to…
Fully flexible views: theory and practice
Attilio Meucci proposes a unified methodology to input non-linear views from any number of users in fully general non-normal markets and perform, among others, stress testing, scenario analysis and ranking allocation. He walks the reader through the…
Geometric mean variance
It is argued that a constrained mean variance framework is superior to Black-Litterman asset allocation, and can help an investor determine the mean excess return vector given their market views
Geometric mean variance
Asset Allocation
Beyond Black-Litterman: views on non-normal markets
In normally distributed markets, the Black-Litterman technique allows managers to construct portfolios that account for their views on a set of expected returns. Attilio Meucci extends the technique to generic market distributions and shows an…
Hedging of corporate pension liabilities
Bernd Scherer here proposes a normative theory of asset/liability management that views externally funded pension funds exclusively from a corporate finance point. Standard asset management solutions are derived after the corporate finance problem has…
Modelling venture capital funds
Modelling venture capital funds is a challenge and has become more important due to recentand upcoming securitisation deals, the need for efficient portfolio management, and Basel II.Here, Thomas Meyer and Tom Weidig summarise the issues both industry…
VAR for fund managers
Investment management
Quantifying the op risk in investment fund valuation
Fund management is often forgotten in the wider push towards quantitative operational risk management. Here, François Longin and Gautier Martin take a closer look at the operational risk that accompanies fund valuation.
Portfolio allocation to corporate bonds with correlated defaults
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility ofcorrelated defaults. Under fairly general assumptions for the distribution of thetotal net assets of a set…
Credit risk measurement of securitisation structures
Peter-Paul Hoogbruin, Harmenjan Sijtsma and Viktor Tchistiakov of ING Group Credit Risk Management present a framework for valuing securitisation tranches from an investor’s perspective.
The maturity effect on credit risk capital
In a mark-to-market approach to credit risk capital, ratings or spread volatility has the effect of making longer-maturity loans more capital-intensive. This is incorporated in the current Basel II proposals via a maturity adjustment factor. Arguing that…
Analytical approach to credit risk modelling
The increasing popularity of VAR-based credit portfolio risk models has led to a growing recognition that Monte Carlo techniques are inadequate for economic capital calculations. Here, Michael Pykhtin and Ashish Dev present a new analytical alternative…
Firm-wide risk management for funds
Firm-wide risk
Take the long and short route
Investment management
The long and the short of it
Investment management
Bound to rebalance
Investment management