Correlation
NMRF framework: does it satisfy the ‘use test’?
Non-modellable risk factors affect risk sensitivity and face practical and calibration difficulties, argue two risk experts
Nifty trades of Graham
Talking Heads 2025: Macro hedge fund shut down swap-spread exposure during April turmoil; sees positive signals amid Trump noise
Skewing the correlation in local and stochastic volatility frameworks via copulas
A copula-based model to capture correlation skew in multi-asset derivatives is presented
Brevan Howard: life beyond macro
Talking Heads 2025: Wider range of strategies helped firm rebound from 2018 low – but brought re-correlation risks
Allocators try to stay strategic in a world turned upside down
Investors are revisiting long-held assumptions about how to allocate large pools of assets
The Covid-19 pandemic and the portfolio diversification effect of catastrophe bonds
The authors delve into catastrophe bonds within an international multiasset portfolio for periods before and during the Covid-19 pandemic, showing how at different times they act as a diversifier and a safe haven.
BoE to consult on promoting clearing for gilt repo market
Isda AGM: Deputy governor also takes aim at bilateral repo haircuts and cross-CCP netting
European Commission changes tune on proposed FRTB multiplier
Banks fear departure from original diversification factor undermines case for permanent relief
Relaxing the assumption of conditional independence in an asymptotic single risk factor model
Within the framework of dynamic credit provisioning and stress testing, this paper shows how conditional correlation impacts an asymptotic single risk factor model.
Podcast: Piterbarg and Nowaczyk on running better backtests
Quants discuss new way to extract independent samples from correlated datasets
Investors back away from vanilla dispersion ahead of US vote
Broader trades and new versions of go-to strategy are proving more popular, say bank QIS teams
Can pod shops channel ‘organisational alpha’?
The tension between a firm and its managers can drag on returns. So far, there’s no perfect fix
Litigation risk assessment: a novel quantitative recency–frequency–monetary model
The authors assess litigation risk and credit risk of companies and investigate interrelationships between these risks, finding a correlation between them.
Quantum cognition machine learning: financial forecasting
A new paradigm for training machine learning algorithms based on quantum cognition is presented
Finland’s Ilmarinen goes back to basics
Talking Heads: Once one of the few funds that would enter bank risk recycling trades, recent overcrowding has seen it pivot to listed equities
Supply chain decoupling fires up alpha focus at BofA
Talking Heads: Stock dispersion sees funds gross up on long/short baskets, while US structured notes come of age
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
Bonds will cushion equities in election volatility – Lombard Odier
August showed old risk models can be trusted ahead of voting day, says investment manager’s macro chief
ETF dispersion set for election revival
Sector-based approach to popular vol trades boasts cheaper entry cost than classic version, proponents argue
The post-Archegos risk model rebuild begins… slowly
Following regulatory prodding, banks start to overhaul counterparty risk models. A flurry of new research on the topic may aid the effort
Correlation breakdowns, spread positions and central counterparty margin models
The authors investigate correlation behavior during adverse market conditions and the potential impact on CCP margins, finding that such breakdowns appear to be more common than expected.