Correlation
Ranking the economic importance of countries and industries
The authors present a methodological framework for quantifying interdependencies in the global market and for evaluating risk levels in the worldwide financial network.
On the correlation and parametric approaches to calculation of credit value adjustment
This paper develops a connection between the Hull–White parametric approach and the PCL correlation approach for CVA calculation.
Stochastic loss given default and exposure at default in a structural model of portfolio credit risk
The authors develop a factor-type latent variable model for portfolio credit risk that accounts for stochastically dependent probability of default (PD), loss given default (LGD) and exposure at default (EAD) at both the systematic and borrower specific…
Reputation risk contagion
The aim of this paper is to assess the effects of the reputation of the members of a group on any single member of the group using the concepts of social influence and convergence in belief.
Interconnectedness risk and active portfolio management
This paper studies centrality (interconnectedness risk) measures and their added value in an active portfolio optimization framework.
Invest on the edges to avoid contagion, research suggests
Loosely connected assets are better protected against market crashes
Equity derivatives house of the year: Bank of America Merrill Lynch
Risk Awards 2017: Innovation helped bank get closer to originate-to-distribute model
The temporal dimension of risk
This paper mathematically formalizes the concept of a temporal path-dependent risk measure in order to capture the risk associated with the temporal dimension of a stochastic process.
Why re-correlation matters in alternative premia investing
Understanding key risk can be difference between success and failure
Operational risk and the Solvency II capital aggregation formula: implications of the hidden correlation assumptions
The authors of this paper analyze the Solvency II standard formula for capital risk aggregation in relation to the treatment of operational risk capital.
NetMES: a network based marginal expected shortfall measure
This paper aims to build novel measures of systemic risk that take the multivariate nature of the problem into account by means of network models.
Pension funds cautioned on equity-bond correlation
Buy-siders need to plug changes into VAR, say risk managers
A simulation comparison of aggregation periods for estimating correlations within operational loss data
This paper investigates the differences in the values of correlations based on different aggregation periods of time series loss data.
Correlation of op risk losses could send capital soaring
BB&T auditor's model shows capital measured by LDA might be pushed up by 16–55%
Operational loss with correlated frequency and severity: an analytical approach
To enable autocorrelation in the frequency distribution, this paper proposes a significant generalization of the LDA model that involves treating operational risk as a Lévy jump-diffusion.
When it comes to correlation, cleaning is a chore that pays
Recent trends in research may help firms obtain reliable correlations from limited data
Cleaning correlation matrices
Bun, Bouchaud and Potters present a technique that allow cleaning in-sample noise from correlation matrixes
A dynamic conditional correlation between commodities and the Islamic stock market
This paper focusses on the dynamics of the correlations between commodities and Islamic indexes.
Risk management for return enhancement
Lundin and Satchell present a non-linear asymmetric dependence method between two assets
European government bond dynamics and stability policies: taming contagion risks
This paper develops methodologies to measure spillover risks in European sovereign bond markets in the period 2004–15.
Correlation skew via stochastic correlation and jumps
Valer Zetocha introduces a correlation model based on the Jacobi process with jumps
Stop-outs under serial correlation and the triple penance rule
This paper provides a theoretical justification as to why investment firms typically set less strict stop-out rules for PMs with higher Sharpe ratios.
Random matrix theory applied to correlations in operational risk
This paper focuses on the distribution of correlations among aggregate operational risk losses.
Hidden price pressures grow in euro swap market
Clients face wider bid/offer spreads, as dealers struggle to find liquid hedges