Fears relationship between credit indexes and constituents becoming more tenuous
The Basel Committee on Banking Supervision has introduced strict regulatory guidance on how to validate and backtest internal model methods for credit exposure. Fabrizio Anfuso, Dimitrios Karyampas and Andreas Nawroth incorporate these guidelines into...
Trading and pricing correlation for structured products
Research decouples risk components
Regulators require banks to use an internal model to compute a capital charge for operational risk, which is thought to be sensitive to assumptions on dependence between losses that still remain a matter of debate. Vivien Brunel proposes an analytical...
New analysis shows CDOs can withstand high levels of correlation – what they can’t cope with, though, is a sudden change in risk appetite
Idea that bank retreat loosens correlation ‘doesn’t make any sense’
Living la vida local
Equity-linked underlyings moving to Euro Stoxx 50
When volatility and correlations spike together, portfolio managers should simulate realistic stresses and be prepared to deal with the additional risks, warns Investor Analytics
Emphasise the positive
The DGAM Unique Strategies, named best specialist fund of hedge funds over three years at the Americas Awards 2013, seeks real diversification in complex and unusual hedge fund strategies
SABR spreads its wings
Rethinking risk and return
A fall in asset-to-asset correlations could mean a good year for many hedge fund strategies, even though volatility is expected to remain relatively low, according to research from Axioma
Given the importance of the crude oil and natural gas futures markets, the intra-market correlations in these markets play an important role in pricing, hedging and managing the risks of energy portfolios. This paper by Ehud Ronn contributes to the...
Analysis from JP Morgan shows strong relationship between intra-stock correlation and equity long/short hedge fund returns
The tight link between commodities and equities is easing as firms become less worried about macro shocks, say analysts
It’s the untold story of JP Morgan’s credit trading losses – how traders were able to reduce risk-weighted assets while loading up on risk, and the part played by Basel 2.5. Michael Watt reports
The cutting crew
An easy-to-hedge covariance swap