Risk magazine - Volume16/No2

Explaining big events

The expression ‘this month’s once-in-a-million event’ has become a cliché in finance. From the sudden bankruptcy of investment-grade companies to 5% daily moves in foreign exchange markets, we’ve seen them all. Rare events – which for practitioners mean …

Extreme forex moves

What is the appropriate statistical description of tail risk in a market portfolio? In the context offoreign exchange, Peter Blum and Michel Dacorogna address this problem using extreme valuetheory. Using 20 years of data, they estimate parameters for an…

From horses to hedging

Financial derivatives rely on liquid underlying markets to work properly, but what happenswhen such underlying markets do not exist, as is the case for indexes such as GDP orunemployment? Here, Ken Baron and Jeffrey Lange suggest a parimutuel auction…

What causes crashes?

Are large market events caused by easily identifiable exogenous shocks such as major newsevents, or can they occur endogenously, without apparent external cause, as an inherent propertyof the market itself? Here, Didier Sornette, Yannick Malevergne and…

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