RSS feedGaussian copula
’Wall Street’s next top model
No it’s not Tyra Banks. Sorry.
According to a technical paper published on Risk.net by Alex Langnau, global head of analytics at Allianz Investment Management and Daniel Cangemi, head of FICC trading at EFG Financial Products,
‘Copulas have an image problem’
Never were truer words spoken of a mathematical formula.
Out on Friday — some über-Geeky weekend reading for those (still?) interested in financial risk management. It comes courtesy of The Joint Forum,
Software of the subprime crisis
Here’s a novel idea about the CDO component of the subprime and financial crisis.
As late as 2003 CDOs were — believe it or not – still being described with words like “Toxic. Explosive. Opaque.”
HMT’s very own synthetic CDO
It exists.
And it’s detailed in the first ever annual report from the UK’s Asset Protection Agency (APA).
It covers the period from December 2009 to the end of March 2010, and features some great bits of detail on the UK government’s Asset Protection Scheme (APS),
Building a better Gaussian copula
It’s ba-ack. The formula that famously felled Wall Street.
The Gaussian copula — with which banks famously evaluated correlation risk for things like CDOs — did not quite live up to its hype. A normal distribution bell curve turned out not to be able to sufficiently take into account correlated default risk for things like subprime mortgages.
Gambling on Monte Carlo simulations
A mathematical model developed by physicists working on the atomic bomb in the 1940s and named after a gambling hub, is probably a fitting one for the US government to adopt in its banking stress tests.
Marking to Markowitz
Harry Markowitz – nobel laureate and father of Modern Portfolio Theory – has outlined a proposal for remedying the current financial crisis – a chief cause of which, he says, is a lack of transparency (H/T to Rolfe Winkler).