Tail risk
Keep risk parity simple, stupid
In times of volatility, simpler risk parity strategies may outperform more elaborate counterparts
Banks shock commodities by 1,000% in stress-test rethink
Energy price spikes force clearing firms to consider extreme or even ‘implausible’ scenarios
Boosting the ESG exposure of a low‑risk portfolio
Nikolay Radev, senior quantitative researcher at FactSet, discusses the limitations of previous environmental, social and governance (ESG) measurement, and proposes a new approach to optimising ESG exposure in minimum tail-risk (MTR) portfolio…
‘Corrective’ algo tells quant firm when it’s wrong
QTS has built a machine to show whether a strategy is likely to succeed or flop
Trend following’s bumper returns mask fading convexity
Research suggests strategy is no longer a reliable hedge against stock market crashes
Inflation scenarios, pt II: end of the party
Whether inflation rises or falls, crowd-sourced scenarios forecast huge range of outcomes
As geopolitical risk spikes, a major index gets a revamp
Geovol risk gauge built by Nobel laureate Robert Engle to become Global Covol
Banks tout CCAR-style stress tests for emergent risks
Extreme-but-plausible scenario planning is being applied to geopolitical events such as Ukraine conflict
Bank of America’s VAR drops 19% in Q4
Average one-day trading VAR falls to lowest point since Q1 2020
Buy side turns to extreme value theory to spot tail risks
Asset managers reappraise decades-old technique to gauge downside risks amid fears of volatile 2022
CCPs unlikely to be wiped out by op losses, research suggests
Former LCH risk chief says sharing loss data would help CCPs avoid risk of holding too little capital, or too much
Prudential CRO: markets haven’t priced in tail risks
Risk USA: distribution of extreme outcomes “has gotten broader and wider”, says Nick Silitch
An examination of the tail contribution to distortion risk measures
This paper reports a method for analyzing the influence of the tail in calculations of distortion risk measures.
Procyclicality control in risk-based margin models
This paper revisits the procyclicality issue in risk-based margin models and provides additional insight on procyclicality mitigation techniques.
Is short vol taking the long count?
Short volatility players try to box clever after strategy’s Covid rout
Fed economist sounds alert over op risk capital arbitrage
Insurance payouts could allow banks to pare back capital without equivalent reduction in risk, says paper
Quants pitch strategies for when bonds no longer work
Investors are flocking to alternative diversifiers of equity risk
Hedge fund of the year: Saba Capital Management
Risk Awards 2021: credit specialist proved its worth in the Covid crisis
Research house of the year: Societe Generale
Risk Awards 2021: quant group’s tail-risk hedging strategies ‘saved the books’ of some big clients
Quant investment firm of the year: Nordea Asset Management
Risk Awards 2021: focus on tail risk – and a little ice in the veins – helped Nordea stare down Covid
Body and tail: an automated tail-detecting procedure
The quality of a tail model, which is determined by data from an unknown distribution, depends critically on the subset of data used to model the tail. Based on a suitably weighted mean square error, the authors present a completely automated method that…
Fund size and the stability of portfolio risk
This paper examines the relationship between portfolio size and the stability of mutual fund risk measures, presenting evidence for economies of scale in risk management.
Federated Hermes’ Murray on psychology and risk management
Buy-side risk survey: top executive talks about learning from Daniel Kahneman and client behaviour
Alt risk premia chasing 'tail beta' – again
Quant strategies that failed in the coronavirus crash face a reckoning