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Multi-factor credit portfolio models are used widely today for managing economic capital and pricing collateralized debt obligations (CDOs) and asset-backed securities. Commonly, practitioners allocate capital to the portfolio components (sub-portfolios, counterparties, or transactions). The...
Persistent link: https://www.econbiz.de/10005107076
Determining contributions to overall portfolio risk is an important topic in risk management. For positions (instruments and sub-portfolios), this problem has been well studied, and a significant theory built, around the calculation of marginal contributions. We consider the problem of...
Persistent link: https://www.econbiz.de/10008484684
The risk/return trade‐off has been a central tenet of portfolio management since the seminal work of Markowitz [1952]. The basic premise, that higher (expected) returns can only be achieved at the expense of greater risk, leads naturally to the concept of an efficient frontier. The efficient...
Persistent link: https://www.econbiz.de/10014901650
Standard market risk optimization tools, based on assumptions of normality, are ineffective for evaluating credit risk. In this article, the authors develop three scenario optimization models for portfolio credit risk. They first create the trading risk profile and find the best hedge position...
Persistent link: https://www.econbiz.de/10014901734
In recent years, several methodologies for measuring portfolio credit risk have been introduced that demonstrate the benefits of using internal models to measure credit risk in the loan book. These models measure economic credit capital and are specifically designed to capture portfolio effects...
Persistent link: https://www.econbiz.de/10014901740
Of great importance to management, the computation of trade-offs presents particular difficulties within DEA since the piecewise linear nature of the envelopment surfaces does not allow for unique derivatives at every point. We present a comprehensive framework for analyzing marginal rates, and...
Persistent link: https://www.econbiz.de/10011154952
Persistent link: https://www.econbiz.de/10005287420
Abstract Numerical challenges inherent in algorithms for computing worst Value-at-Risk in homogeneous portfolios are identified and solutions as well as words of warning concerning their implementation are provided. Furthermore, both conceptual and computational improvements to the Rearrangement...
Persistent link: https://www.econbiz.de/10014621247
Insurers are competing by adopting product innovations that provide the insured with integrated coverage for actuarial and financial risks. This article compares the contract structures of blended life policies between the insurance markets in Italy and the United Kingdom within the context of...
Persistent link: https://www.econbiz.de/10014901675
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