Correlation
Correlation: Alternative realities
Correlation: Alternative realities
Factor models for credit correlation
Stewart Inglis, Alex Lipton and Artur Sepp present an extension of the static factor model for pricing credit correlation products introduced by Lipton (2006) and detailed in Inglis & Lipton (2007)
Hedging the hard way
Quanto options have stung dealers' equity derivatives books after the unexpected spikes in volatility and correlation that followed the Lehman Brothers collapse, while structured product issuers have been hit by plummeting dividend expectations and…
Stock responses
Exotics
Sunk by correlation
Equity Derivatives
Explaining the Levy base correlation smile
Joao Garcia and Serge Goossens look at base expected loss at maturity both in the Gaussian copula and Levy-based models, and link it to base correlation in these frameworks. They report on the existence of smile in both base correlation curves and…
Sunk by correlation
Equity derivatives dealers faced a grim picture across global markets earlier this year, with steep rises in correlation and volatility together with a slump in dividend expectations decimating exotic books. How have dealers responded? By Mark Pengelly
Room for skew
Skew
Equity correlation – explaining the investment opportunity
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Valid Assumptions Required: calculating correlations
Correlation measures are major drivers of value-at-risk. Brett Humphreys and Eric Raleigh review assumptions associated with calculating correlation.
Riding the waves – how to achieve low correlation in volatile equity markets
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Factor models for credit correlation
Stewart Inglis and Alex Lipton describe dynamic and static factor models for credit correlation, and show how the static model can be calibrated to the market and used for the pricing of standard and bespoke tranches, including tranchelets
Structured Products House of the Year - BNP Paribas
Risk Awards 2008
Derivatives Research House of the Year - Citi
Risk Awards 2008
Factor models for credit correlation
Stewart Inglis and Alex Lipton describe dynamic and static factor models for credit correlation, and show how the static model can be calibrated to the market and used for the pricing of standard and bespoke tranches including tranchelets
Inflation-indexed securities - Inflation with a smile
In the current inflation-indexed markets, most traded options have zero or even negative strikes. This highlights the need for a smile-consistent valuation of caps and floors on inflation rates. To this end, Fabio Mercurio and Nicola Moreni propose a…
A difference of opinion
CMS spread options have been just about everywhere this year, with investors keen to take a view on the shape of the yield curve. But a wide variation in pricing has sparked speculation that some banks may not be modelling these products accurately. By…
Understanding variations in the risk of multi-strategy portfolios
Investors spend a great deal of time and effort setting a thoughtful risk budget for their portfolio,only to see all too frequently that the targeted risk will be missed by a wide margin when theinvestment process gets started. In this article, Gang…
Estimating default correlations using a reduced-form model
Credit risk : Cuttingedge
Basel II revised default correlation values reflect industry experience, says Fitch
Basel II revised credit card default correlation values will be crucial guidelines to credit portfolio analysis under the IRB approach, says Fitch Ratings, a rating agency based in New York.