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John A Morrison's Blog – April 2009 Archive (15)

DSGE Model-Based Forecasting of Non-modelled Variables

DSGE Model-Based Forecasting of Non-modelled Variables



Frank Schorfheide

Keith Sill

Maxym Kryshko



University of Pennsylvania and Federal Reserve Board of Pennsylvania



ABSTRACT



This paper develops and illustrates a simple method to generate a DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). We use auxiliary regressions that resemble measurement equations in a dynamic factor model to…

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Added by John A Morrison on April 28, 2009 at 4:00am — No Comments

The Copula AGAIN - Forecasting VaR and Expected Shortfall using Dynamical Systems

Forecasting VaR and Expected Shortfall using Dynamical Systems A Risk Management Strategy



Cyril Caillault; Chief Investor Officer, Quantitative Strategies,

Fixed Income and Currencies, Fortis Investments,



Dominique Guégan, PSE – CES-MSE - Université Paris 1 – Panthéon – Sorbonne



Abstract

Using non-parametric and parametric models, we show that the bivariate distribution of an Asian portfolio is not stable along all the period under study. We suggest…

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Added by John A Morrison on April 27, 2009 at 12:00pm — No Comments

CDO Pricing with Copulae (Crucial Methodological Paper)

THIS QUITE SIMPLY IS A CRUCIAL PAPER IN THE METHODOLOGY OF CREDIT ASSET RISK PRICING



CDO Pricing with Copulae



Barbara Choros

Wolfgang Härdle

Ostap Okhrin



ABSTRACT



Modeling the portfolio credit risk is one of the crucial issues of the last years in the financial problems. We propose the valuation model of Collateralized Debt Obligations based on a one- and two-parameter copula and default intensities estimated from market data. The…

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Added by John A Morrison on April 19, 2009 at 11:30pm — No Comments

The Alchemy of CDO Credit Ratings - Harvard (Economics)

It's unusual that I see anything from Harvard in my space, if its from Harvard it usually is of interest to my wife! (of which a little more later). But this is interesting allright, more than that its really good;-



The Alchemy of CDO Credit Ratings by Efraim Benmelech (Harvard University and NBER)

Jennifer Dlugosz (Harvard University and Harvard Business School)



ABSTRACT



Collateralized Loan Obligations (CLOs) were one of the largest and fastest growing… Continue

Added by John A Morrison on April 19, 2009 at 11:00pm — No Comments

REvolution R Enterprise with Parallel Processing Now Available for 64-bit Windows

Working with R Community Leaders and Microsoft, REvolution Provides More Memory and Greater Computational Speed, Plus Parallelization for Predictive Analytics Using the R Language

http://www.asymptotix.eu/node/336

Added by John A Morrison on April 18, 2009 at 3:52am — No Comments

Does a Central Clearing Counterparty Reduce Counterparty Risk?

Darrell Duffie and Haoxiang Zhu

Stanford University



Abstract



We show whether adding a central clearing counterparty (CCP) for a particular asset class, such as credit derivatives, improves the e±ciency of counterparty risk mitigation and collateral demands, relative to bilateral netting between pairs of dealers. We show that, for plausible cases, adding a CCP for one class of derivatives such as credit default swaps (CDS) can actually reduce netting e±ciency and… Continue

Added by John A Morrison on April 18, 2009 at 3:48am — No Comments

WHAT DO ASSET PRICES HAVE TO SAY ABOUT RISK APPETITE AND UNCERTAINTY?

by

Geert Bekaert (Columbia Business School) &

Marie Hoerova and Martin Scheicher (European Central Bank)



EUROPEAN CENTRAL BANK WORKING PAPER SERIES



EXECUTIVE SUMMARY (ABSTRACT)



In this paper, we develop a measure of time-varying risk aversion that is relatively easy to estimate or compute, so that it can be compared to the practitioners’ indices. However, the model we use is inspired by the dynamic asset pricing literature. We view…

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Added by John A Morrison on April 17, 2009 at 11:00am — No Comments

The role of valuation and leverage in procyclicality

Report prepared by a joint Working Group of

the Financial Stability Forum and the Committee on the Global Financial System



This report explores the link between leverage and valuation in the light of the recent experience of market stress. Prior to the crisis, traditional balance sheet measures of leverage did not give an unambiguous signal of higher risk during the boom years of 2003–07. While balance sheet leverage increased at European banks and US investment banks, and for… Continue

Added by John A Morrison on April 17, 2009 at 11:00am — No Comments

Taking High Performance Computing Mainstream with Microsoft

At the High Performance on Wall Street conference (last September (2008)), Microsoft’s high performance computing honcho, Bill Laing announced Windows HPC Server 2008. Microsoft’s goal is to take HPC mainstream and make Windows an alternative to Linux and Unix for HPC customers, particularly in the financial sector.…



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Added by John A Morrison on April 17, 2009 at 10:47am — No Comments

VALUING TOXIC ASSETS: AN ANALYSIS OF CDO EQUITY

VALUING TOXIC ASSETS: AN ANALYSIS OF CDO EQUITY



Francis A. Longstaff, UCLA Anderson School , and NBER

Brett Myers, Krannert School of Management, Purdue University, and Research Affiliates, LLC



This paper studies this issue from a novel perspective by contrasting the valuation of CDO equity with that of bank stocks. This is possible because both CDO equity and bank stock represent levered first-loss residual claims on an underlying portfolio of debt. There are strong… Continue

Added by John A Morrison on April 17, 2009 at 10:42am — No Comments

Optimization Heuristics for Determining Internal Rating Grading Scales

by M. Lyra, J. Paha, S. Paterlini, P. Winker

CEFIN – Centro Studi di Banca e Finanza

Dipartimento di Economia Aziendale – Università di Modena e Reggio Emilia



Abstract



Basel II imposes regulatory capital on banks related to the de-fault risk of their credit portfolio. Banks using an internal rating approach compute the regulatory capital from pooled probabilities of default. These pooled probabilities can be calculated by clustering credit borrowers into… Continue

Added by John A Morrison on April 17, 2009 at 10:30am — No Comments

European Central Bank WORKING PAPER SERIES LIQUIDITY RISK PREMIA IN UNSECURED INTERBANK MONEY MARKETS

LIQUIDITY RISK PREMIA IN UNSECURED INTERBANK MONEY MARKETS



by Jens Eisenschmidt & and Jens Tapking



http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1025.pdf





The model (presented in this paper) provides a simple explanation for the rise of interest rates in unsecured interbank term money markets in the wake of the financial market turmoil that started in August 2007. It can explain two… Continue

Added by John A Morrison on April 9, 2009 at 4:44am — No Comments

Government and open source: Public interest - Quantitative Valuation of Toxic Assets and "Open Data"

Bob Sutor or Dr. Robert S. Sutor who is Vice President, Open Source and Linux, IBM Corporation, Somers, New York; has a great blog which I have been following for nearly a year now, he goes to the mark on many issues relevant to quantitative analytics. The blog front page is here;-



http://www.sutor.com/newsite/blog-open/



This week Bob asked a question which I have been thinking about for some time and indeed have… Continue

Added by John A Morrison on April 9, 2009 at 3:36am — No Comments

Personal Advice from REvolution Computing to ME!

I wonder (I know it's a little self obsessed) but I just wonder if this blog entry on the the REvolution Computing blog "REvolutions" is not personal advice, narrowcasted to ME!?



You know that feeling you get when you are in a crowd and a speaker makes a point which you feel cannot be anything but personally directed at YOU! Or when you are at a concert and you feel the lead vocalist is singing to you!!



Ususally that psychological interpretation is just a strong… Continue

Added by John A Morrison on April 3, 2009 at 12:56am — No Comments

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