# risk-management

### risk management - Consistency of economic scenarios in nested stochastics simulation

The Global Calibration paper outlines a method which is one approach to resolve inconsistencies between pricing and calculating risk measures.... Read More

### risk - How to calculate the distortion function for CVaR?

I have solved it myself. The key was to realize that for $X \geq 0$ and $S_X(t) = \mathbb{P}(X>t)$ $$\int0^\infty S(t) dt = \int0^1 F_X^{-1}(u) du = \mathbb{E}\left[X \right].$$ This is elegantly ex... Read More

### quant trading strategies - New ways of communicating risk

Try to give David Spiegelhalter a read/listen to David Spiegelhalter's work and research. He is a statistician and a Professor of the Public Understanding of Risk at Cambridge England. Rather than n... Read More

### Quantitative risk model for an open real estate mutual fund in Europe

First of all, usually these models are heavily adapted to a specific country (even for Europe), real estate class (housing, commercial) and market (secondary, primary). In general I would say it's ve... Read More

### risk management - What is the optimal strategy when there is an equal chance for gain or loss but the size of the potential gain is larger?

This is practically a textbook case begging for the Kelly criterion. In your specific example, the optimal trade size is $f^A$, where $f^$ maximizes the average rate of return \mathbb{E}[\log (X)]... Read More

### risk - Credit VaR Formula

Here is the excel formula with steps: =NORMSDIST((NORMSINV(0.02)+NORMSINV(0.999)×SQRT(0.1))/SQRT(1−0.1)) =NORMSDIST((−2.054+3.09×SQRT(0.1))/SQRT(1−0.1)) =NORMSDIST(-1.135) =12.8% They keep changing t... Read More

### Examples of Spectral Risk Measures

I believe that Prospect Theory (as defined by Kahneman, Amos, and Tversky) implicitly makes use spectral risk measures. Though I am not able to find any literature linking the two, I think there is c... Read More

### risk management - Extracting Default probability from a single CDS

Yes, you can assume that, since you cannot extract the probability of default for shorter maturity, but for the 5-years only CDS one, because of unavailability of data. Of course, you'll have to upda... Read More

### Which lags or percentiles should be run in a batch when calculating Value-at-Risk?

Standard (read: regulators will accept it) could be a one day, 99% VaR calculated with two years of historical data. A minimum of one year of history is needed although this is not the norm. Typicall... Read More

### mathematics - What is the analytic value of an asset's risk contribution, if $n=2$?

You see, you added something new to the source formula, i.e. a dependence between weights of different assets: $w2 = 1 - w1$. Let's try to forget that they are related to each other and vary them ind... Read More