Assessing the Quality of Risk Measures
About the Lecture
The lecture Assessing the Quality of Risk Measures by Edu Pristine is from the course Archiv - Operational Risk. It contains the following chapters:
- AIM Statements
- Ways that Errors can be introduced into Models
- Types of Horizon, Computational and Modeling Decisions
- Mapping of Risk Factors to Positions in Making VaR Calculations
- Improper Mapping - Liquidity Risk
- Improper Mapping - Basis Risk
- 2005 Credit Correlation Episode
- Underestimation of Systematic Risk for Residential Mortgage Backed Securities
Author of lecture Assessing the Quality of Risk Measures
Edu Pristine
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Excerpts from the accompanying material
... decisions which could result in variability of VaR estimates. Identify challenges related to mapping of risk factors to positions in making VaR calculations. Explain how improper mapping can understate specific risks such as basis ...
... build the model might not be correct. Applying the model for the purpose it is not built for ...
... the variability of VaR estimates. 1. There is no uniformity in practice when it comes to choosing the confidence level and time horizons. 2. Even if there is standardization in choosing confidence level and time horizons, different ways ...
... addresses certain risk factors. This problem in observed in the mapping securitization products to time series of corporate spread with same rating. For some strategies it is difficult to map risk factors because the ...
... Convertible bonds are mapped to a set of risk factors like implied volatilities, interest rates and credit spread. This mapping is based on the theoretical price of convertible bond which ...
... will be zero even though there is significant basis risk. Securitization exposures are often hedged with similarly rated corporate CDS indexes. If both the exposure and CDX hedge ...
... issues in the set up of trade. The critical flaw in the modeling was that the correlation between equity tranche and mezzanine tranche was assumed to be static. Changing correlation drastically altered the hedge ratio between the equity ...
... In the stress case, the house price might fail to rise but would not actually drop. 2. Correlations about regional housing markets was assumed to be low ...
