Editor: Farid AitSahlia
Published: 11 Dec 2009
Papers in this issue
by Ikhlaas Gurrib
by John Cotter, Jim Hanly
by Michael J. Grebeck, Svetlozar T. Rachev and Frank J. Fabozzi
by Christopher C. Finger
Warrington College of Business Administration, University of Florida
This issue marks my first as Editor-in-Chief. For their support, I am very grateful to Nick Carver, the Publisher, Lucie Carter, the Journals Manager, and Stan Uryasev, the departing Editor-in-Chief, who now becomes Editor Emeritus and Chairman of the Board. I appreciate Stan wanting to remain involved with the journal and look forward to the special issue on "Risk management and the interface of behavioural and quantitative finance" that he is working on for next year. Thanks to Stan, I have been very fortunate to be closely involved with the editorial process during his tenure over the past three years.
Since its inception more than a decade ago, The Journal of Risk has received a steady flow of high-quality submissions. These have addressed various aspects of risk, both empirically and theoretically, with a view toward immediate applications. As the financial developments of late have clearly shown, there still exists a strong need for quantitative models of financial risk assessment and management. My objective is to maintain the leadership role of The Journal of Risk regarding these topics. I will thus endeavor to maintain the high quality of the journal while striving to improve the review turnaround.
The Journal of Risk continues to attract papers addressing issues that are related to current events. The first article presented, by Finger, evaluates the standard onefactor Gaussian copula model for collateralized debt obligations, which, for many, are at the core of the financial crisis we just experienced. This paper shows that, despite its relative simplicity, the hedging performance of this copula model is more consistent and reliable than significantly more complex alternatives.
The following paper, by Grebeck et al, deals with optimization in the context of pension fund management. This topic is particularly relevant in the present economic environment as many who were set to retire had to either prolong their employment or do with less in retirement. In their paper, the authors show how to apply stochastic optimization and conditional value-at-risk to address the joint problem of maximizing the expected surplus on the retirement date while minimizing risk until then.
Although not cast in the realm of pension management, the third article, by Cotter and Hanly, highlights the importance of investment horizons. Their focus is on hedging cash positions with futures strategies. In particular, they examine the impact of volatility on the scalability of short-term hedging strategies to various investment horizons.
In light of the rapid evolution of critical milestones during the recent financial crisis, a great deal of concern has been placed on trading volatility. The fourth and final paper of this issue, by Gurrib, is an empirical examination of the trading volatilities of large hedgers and speculators in US commodity futures. Based on generalized autoregressive conditional heteroskedasticity (GARCH) and power ARCH (PARCH) fittings, the author shows that while both speculators and hedgers learn over time from their activities, the former rely more on noise trading and herding.
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