Wrong way risk can be incorporated in Credit Value Adjustment (CVA) calculations in a reduced form model. Hull and White (2012) introduced a CVA model that captures wrong way risk by expressing the stochastic intensity of a counterparty's default time in terms of the financial institution's...

In this article, the authors measure the impact of estimation error on latent factor model forecasts of portfolio risk and factor exposures. In markets simulated with a Gaussian return generating process, the authors measure errors in forecasts for equally weighted and long-only minimum variance...

An extended history of market returns reveals aspects of financial risk that are not evident over short timescales. The most enduring risk measure is variance, which quantifies short-term regularities in return dispersion. An alternative measure, shortfall, quantifies the risk of extreme market...

The authors extended the standard paradigm for portfolio stress testing in two ways. First, they introduced a toolkit that enables investors to envision and administer extreme scenarios. The risk model is integral to the stress test. They demonstrated the substantial impact of using historical...