Technical paper/Collateral

Cutting Edge introduction: Followers of fashion

Focusing on how often a trading strategy ends on the winning side can distract from the question of whether it profits on average. The key is in the return distribution’s skew – and at least for trend-following strategies this can be directly controlled…

Ultimate recoveries

Measuring recovery using the ultimate rate observed at emergence from bankruptcy may be conceptually desirable, but modelling it is difficult.

Ultimate recoveries

Measuring recovery using the ultimate rate observed at emergence from bankruptcy may be conceptually desirable, but modelling it is difficult. Craig Friedman and Sven Sandow tackle the problem by maximising the creditor’s utility function, constructed…

Unexpected recovery risk

For credit portfolio managers, the priority is to properly incorporate recovery rates into existing models. Here, Michael Pykhtin improves upon earlier approaches, allowing recovery rates to depend on the idiosyncratic part of a borrower’s asset return,…

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