Technical paper/Market risk
Cutting Edge introduction: The trouble with algorithmic execution
New set-up allows fast, tractable optimisation of trade execution, without neglecting downside risk
Cutting Edge introduction: Tales of tails
Tales of tails
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…
Risk 25: Cutting edge classics
Don’t say we didn’t warn you
Cutting Edge introduction: Hedging dependence
Hedging dependence
Cutting edge introduction: perturbing the smile
Perturbing the smile
Cutting Edge introduction: viva cross-vegas
Viva cross-vegas
Cutting Edge introduction: risky contributions
Risky contributions
Cutting Edge introduction: requiem for a probabilist
Requiem for a probabilist
Right Laplace, right time
Right Laplace, right time
Cutting edge introduction
A popular copula
Valuation of with-profit insurance policies with interest rate guarantees
Classical with-profit life insurance products are traditionally backed by a buy-and-hold bond investment strategy. Using book-value accounting for such products tends to lead to a design of the guarantee rate based on an average of long-term interest…
A dynamic model for hard-to-borrow stocks
Traders with short positions in stocks that are subject to short-selling restrictions risk being 'bought in', in the sense that their positions may be closed out by the clearing firm at market prices. Marco Avellaneda and Mike Lipkin present a model for…
A dynamic model for hard-to-borrow stocks
Traders with short positions in stocks that are subject to short-selling restrictions risk being 'bought in', in the sense that their positions may be closed out by the clearing firm at market prices. Marco Avellaneda and Mike Lipkin present a model for…
Error of VAR by overlapping intervals
When overlapping intervals in time series are used, volatility and price changes' percentiles are underestimated. Consequently, value-at-risk is also underestimated. Heng Sun, Izzy Nelken, Guowen Han and Jiping Guo measure the size of this underestimation
Error of VAR by overlapping intervals
When overlapping intervals in time series are used, volatility and price changes' percentiles are underestimated. Consequently, value-at-risk is also underestimated. Heng Sun, Izzy Nelken, Guowen Han and Jiping Guo measure the size of this underestimation
Solvency II Reinsurance - Counterparty default risk
Technical papers
Component VAR for a non-normal world
It has become standard to account for non-normality when estimating portfolio value-at-risk, but there are few methods available to calculate the risk contributions of each component in a non-normal portfolio. Brian Peterson and Kris Boudt present a…
Component VAR for a non-normal world
Market Risk
On the cost of regulation under Solvency II
Technical papers
Looking forward to back testing
With increasing challenges to measure value-at-risk and meet high regulatory requirements, the focus has turned to back testing as a way of assuring models' adequacy. Carsten S Wehn proposes a new regime of back testing, combining state-of-the-art…