Cracking VAR with kernels

The notion of component value-at-risk (CVAR) originated in the papers of Garman (1996, 1997) and Litterman (1997a, 1997b), and has been used by banks as a practical risk analysis tool since at least Epperlein & Sondhi (1997). The goal is to calculate how much some component of a portfolio contributes to the total VAR of that portfolio. We denote the profit and loss (P&L) of the portfolio as PL and the P&L of the ith component as PLi, so that:

- from a simulated sample. If we are willing to

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The new rules of market risk management

Amid 2020’s Covid-19-related market turmoil – with volatility and value-at-risk (VAR) measures soaring – some of the world’s largest investment banks took advantage of the extraordinary conditions to notch up record trading revenues. In a recent Risk.net…

ETF strategies to manage market volatility

Money managers and institutional investors are re-evaluating investment strategies in the face of rapidly shifting market conditions. Consequently, selective genres of exchange-traded funds (ETFs) are seeing robust growth in assets. Hong Kong Exchanges…

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