Open Filter
A Conditional Valuation Approach for Path-Dependent Instruments
This paper focuses on the methodology for calculating the potential future exposure of path-dependent derivative instruments.
A Markovian Model of Default Interactions: Comments and Extensions
This article analyses Davis and Lo (2001b) enhanced risk model, which is a dynamic version of the popular market model of infectious defaults of Davis and Lo (2001a).
A VaR-based Model for the Yield Curve
An intuitive model for the yield curve, based on the notion of value-at-risk, is presented. It leads to interest rates that hedge against potential losses incurred from holding an underlying risky security until maturity. This result is also shown to tie in directly with the Capital Asset Pricing Model via the Sharpe Ratio. The conclusion here is that the normal yield curve can be characterised by a constant Sharpe Ratio, non-dimensionalised with respect to √T, where T is the bond maturity.
Anything Built By the FED, Can Also Be Destroyed
In this commentary, Edward Talisse examines the year’s bond investment, looking closely at the USA and countries in Europe including Spain, Italy and Greece.
Building Your Wings on the Way Down
Aaron Brown discusses financial risk in this article from Wilmott Magazine.
Forecasting the Yield Curve with S-Plus
In this paper, Dario Cziráky, shows how to implement the Nelson-Siegel and Svensson models using non-linear least squares and how to obtain standard errors and confidence intervals for the parameters, which proves to be useful in assessing the goodness-of-fit at specific points in the term structure, such as at the events of non-parallel shifts.
Introduction to Variance Swaps
The purpose of this article is to introduce the properties of variance swaps, and give insights into the hedging and valuation of these instruments from the particular lens of an option trader.
Order Statistics for Value at Risk Estimation and Option Pricing
We apply order statistics to the setting of VaR estimation. Here techniques like historical and Monte Carlo simulation rely on using the k-th heaviest loss to estimate the quantile of the profit and loss distribution of a portfolio of assets. We show that when the k-th heaviest loss is used the expected quantile and its error will be independent of the portfolio composition and the return functions of the assets in the portfolio.
Potential Future Exposure Calculations Using the BGM Model
Within this paper the authors look at the BGM model in PFE calculations for various exotic interest rate products.
Risk Management: A Review
Dr. Sébastien Lleo presents CQF Institute members with his review in Risk Management.
