Tail risk
The art of harnessing volatility
Harnessing volatility
Investors seek tail risk funds to cover 'black swan' events
Swimming with the black swans
The Universa approach to hedging tail risk
Profiting from disaster
Regulators double down
Regulators double down
Cross-asset correlations pose opportunities - and threats
Opportunities and threats
BAML tinkers with tradable volatility index for tail risk hedging
Bank of America Merrill Lynch has developed a liquid volatility index for institutions which are seeking a systematic tail risk hedge.
CBOE developing tail event index
A new index based on skew will be unveiled once testing is completed
BP crisis pushes Big Oil further into deep water
As thousands of barrels of oil continue to spill into the Gulf of Mexico, energy giant BP has seen its bond spreads widen to unprecedented levels. What will be the implications for Big Oil, and can investors factor in tail risks of this magnitude?
BP oil spill “frightening reminder” of tail risk, say analysts
As oil continues to spill into the Gulf of Mexico, analysts have warned there is little investors can do to hedge against the risk of disasters on the scale of the Deepwater Horizon incident.
What does VAR mean in 2010?
Value-at-risk figures fell across the industry in 2009, while exceptions dropped significantly from levels in 2007 and 2008. But discussion over what VAR figures actually show and how the numbers are interpreted by senior management continues. By…
A sting in the tail
After recent financial turmoil, market participants are thinking much more rigorously about ways to protect themselves against the possibility of rare but extreme events. However, effectively hedging tail risk is not straightforward. By Mark Pengelly
A rotationally invariant technique for rare event simulation
Because of their low probability, including extreme events in Monte Carlo calculations of the value-at-risk of a credit-risky portfolio requires many simulations. Here, Susanne Klöppel, Ranja Reda and Walter Schachermayer demonstrate a geometrically…
Scaling conditional tail probability and quantile estimators
John Cotter presents a novel procedure for scaling relatively high-frequency tail probability and quantile estimates for the conditional distribution of returns
Rethinking (operational) risk management
For operational risk managers to really make a difference to their firms' fortunes, they must be willing to get their hands dirty and face facts, no matter how scary the facts may be, says Sergio Scandizzo, in the second of a two-part series
Risk reallocation
The originate-and-distribute model offered a means for banks to offload credit risk from their balance sheets and distribute it to investors. But Andrew Haldane and Lewis Webber of the Bank of England argue this risk was often passed on to those least…
Tails of the unexpected
Credit Models
CRO Forum study released
Industry body the Chief Risk Officer (CRO) Forum, which consists of the chief risk officers of Europe's leading insurers, is advancing the case for the use of proprietary internal models under Solvency II with the publication of a new in-depth report.
Boston Fed publishes new op risk paper
The Federal Reserve Bank of Boston published another ground-breaking paper on operational risk in mid-June.
Generalising universal performance measures
Performance and risk measurement are fundamental quantitative activities in finance, andnew ways of measuring them are always of interest. A recently proposed procedure is theuniversal performance measure. Theofanis Darsinos and Stephen Satchell show…
How to spot a VaR cheat
Traders can use weaknesses in VaR measurement to make it appear that they are not taking any risks. Brett Humphreys exposes how easily this can be done
Contributions to credit risk
Optimisation of credit portfolios requires that risk contributions be quantified. However, there has been disagreement over which of three popular tail risk measures should be used. Here, Alexandre Kurth and Dirk Tasche offer a way forward, showing how…
Basel's CDO solution
As the Basel Committee on Banking Supervision continues its stately progress towards a revised capital Accord, one area remains under debate: the proposed capital rules for asset securitisations.
Contributions to credit risk
Optimisation of credit portfolios requires that risk contributions be quantified. However, there has been disagreement over which of three popular tail risk measures should be used. Here, Alexandre Kurth and Dirk Tasche offer a way forward, showing how…