Technical paper
Pitfalls and solutions in current risk management methodology
Volume 16, Issue 5 (2014)
Diversifying risk parity
Volume 16, Issue 5 (2014)
Risk evaluation of mortgage-loan portfolios in a low interest rate environment
Volume 16, Issue 5 (2014)
The Bayesian roots of risk balancing
Risk balancing has been considered a heuristic asset allocation method. In this paper, the authors show that, on the contrary, risk balancing is a special case of a utility optimization problem with log regularization that constrains risk concentration.
Risk–return-efficient target-volatility strategies
Volume 3, Issue 3 (2014)
Two centuries of trend following
Volume 3, Issue 3 (2014)
Cutting Edge introduction: The trouble with algorithmic execution
New set-up allows fast, tractable optimisation of trade execution, without neglecting downside risk
Operational risk modelled analytically
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…
Optimal execution with a price limiter
Balancing the price uncertainty and price impact of large orders is an important issue for many market participants. While classical approaches lead to trading algorithms that are invariably price-path insensitive, in this article, Sebastian Jaimungal…
The properties of expectiles explored
Expectiles’ risk contributions are essentially the same as those of expected shortfall
Cutting edge intro: CDOs and the risk of risk aversion
New analysis shows CDOs can withstand high levels of correlation – what they can’t cope with, though, is a sudden change in risk appetite
Expectiles behave as expected
Expectiles' results are analogous to those of value-at-risk and expected shortfall
Credit goes to forward rate spreads
Term structure of interest rates explained with a credit model
Portfolio construction and systematic trading with factor entropy pooling
Portfolio construction and systematic trading with factor entropy pooling
Why CDOs work
Collateralised debt obligations have largely gone under the radar since the 2007 financial meltdown, when their market collapsed. Nearly every attempt at explaining the cause of their failure pointed towards flawed assumptions in pricing models and…
Smile transformation for price prediction
Prediction of arbitrage-free option prices that outperform existing models