Correlation Management Tool Requires Model Transparency

BOSTON--Since correlations between asset classes and market factors are not the same during the up and down markets, risk experts argue that financial institutions can reduce risks by overweighting assets that have lower correlations in down markets--a strategy that provides portfolio diversification at the right time. Implementing this strategy, however, is typically stymied by a long-standing source of operational risk: the exclusivity that quantitative analysts, code librarians and systems