Capital market finance: an introduction to primitive assets, derivatives, portfolio management and risk Volume 2
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Cham, Switzerland
Springer
[2022]
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| Series: | Springer texts in business and economics
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| Online Access: | Inhaltsverzeichnis |
| Physical Description: | xxxvii, Seiten 872-1364 Diagramme |
| ISBN: | 9783030845988 |
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| 245 | 1 | 0 | |a Capital market finance |b an introduction to primitive assets, derivatives, portfolio management and risk |n Volume 2 |c Patrice Poncet, Roland Portait ; contributions by Igor Toder |
| 264 | 1 | |a Cham, Switzerland |b Springer |c [2022] | |
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| adam_text | Contents Part III 21 Portfolio Theory and Portfolio Management Choice Under Uncertainty and Portfolio Optimization in a Static Framework: The Markowitz Model..................................................... 21.1 Rational Choices Under Uncertainty: The Criteria of the Expected Utility and Mean-Variance............................................ 21.1.1 The Expected Utility Criterion........................................ 21.1.2 Some Features of Utility Functions................................ 21.1.3 Risk Aversion and Concavity of the Utility Function . 21.1.4 Some Standard Utility Functions.................................... 21.1.5 The Mean-Variance Criterion......................................... 21.2 Intuitive and Graphic Presentation of the Main Concepts of Portfolio Theoiy......................................................................... 21.2.1 Assumptions, General Framework and Efficient Portfolios........................................................................... 21.2.2 Two-Asset Portfolios........................................................ 21.2.3 Portfolios with N Securities............................................. 21.2.4 Portfolio Diversification................................................... 21.3 Mathematical Analysis of Efficient Portfolio Choices................ 21.3.1 General Framework and Notations.................................. 21.3.2 Efficient Portfolios and Portfolio Choice in the Absence of a Risk-Free Asset and of Portfolio Constraints........................................................................ 21.3.3
Efficient Portfolios in the Presence of a Risk-Free Asset, with Allowed Short Positions; Tobin’s Two-Fund Separation...................................................... 21.4 Some Extensions of the Standard Model and Alternatives. . . . 21.4.1 Problems Implementing the Markowitz Model; The Black-Litterman Procedure.............................................. 21.4.2 Ban on Short Positions.................................................... 21.4.3 Separation Results When Investors Maximize Expected Utility But Do Not Follow the Mean-Variance Criterion (Cass and Stiglitz).. 910 873 874 874 876 877 879 881 882 883 884 887 890 894 894 898 904 906 906 908 XV
Contents xvi Loss Aversion and Introduction to Behavioral Finance.................................................................. 911 21.5 Summary............................................................................................. Appendix 1: The Axiomatic of Von Neuman and Morgenstem and Expected Utility............................................................................................ Al.l The Objects of Choice.......................................................... Al.2 The Axioms ConcerningPreferences.................................. A1.3 The Expected Utility Criterion............................................. Al.4 Notes and Complements...................................................... Appendix 2: A Reminder of Quadratic Forms and the Calculation of Gradients....................................................................................................... Appendix 3: Expectations, Variances and Covariances—Definitions and Calculation Rules.................................................................................. A3.1 Definitionsand Reminder..................................................... A3.2 CalculationRules................................................................... Appendix 4: Reminder on Optimization Methods Under Constraints . . . A4.1 Optimization When the Constraints Take the Form of Equalities........................................................................................... A4.2 Optimization Under Inequality Constraints....................... Suggestions for Further
Reading................................................................ Books................................................................................................. Articles.............................................................................................. 21.4.4 22 The Capital Asset Pricing Model........................................................... 22.1 Derivation of the CAPM................................................................. 22.1.1 Hypotheses......................................................................... 22.1.2 Intermediate Results in the Presence of a Risk-Free Asset.................................................................... 931 22.1.3 The CAPM......................................................................... 22.2 Applications of the CAPM............................................................ 22.2.1 Use of the CAPM for Financial Investment Purposes . . 22.2.2 Physical Investments by Firms......................................... 22.2.3 Standard Performance Measures...................................... 22.3 Extensions of the CAPM................................................................ 22.3.1 Merton’s Intertemporal CAPM......................................... 22.3.2 International CAPM........................................................... 22.4 Limits of the CAPM....................................................................... 22.4.1 Efficiency of the Market Portfolio and Roll’s Criticism.............................................................. 22.4.2 Stability of
Betas............................................................... 22.5 Tests of the CAPM........................................................................... 22.6 Summary........................................................................................... Suggestions for Further Reading............................................................... Books................................................................................................ Articles.............................................................................................. 915 916 917 918 919 921 922 923 923 924 925 925 926 927 927 927 929 929 930 933 943 943 946 947 953 953 954 955 955 956 957 960 961 961 962
Contents xvii 23 Arbitrage Pricing Theory and Multi-factor Models.......................... 23.1 Multi-factor Models........................................................................ 23.1.1 Presentation of Models................................................... 23.1.2 Portfolio Management Models in Practice.................... 23.2 Arbitrage Pricing Theory............................................................... 23.2.1 Assumptions and Notations........................................... 23.2.2 The APT.......................................................................... 23.2.3 Relationship with the CAPM......................................... 23.3 APT Applications and the Fama-French Model.......................... 23.3.1 Implementation of Multi-factor Models and APT. . . . 23.3.2 Portfolio Selection........................................................... 23.3.3 The Three-Factor Model of Fama and French.............. 23.4 Econometric Tests and Comparison of Models........................... 23.4.1 Tests of the APT............................................................. 23.4.2 Empirical and Practical CAPM-APT Comparison.... 23.4.3 Comparison of Factor Models........................................ 23.5 Summary.......................................................................................... Appendix 1 : Orthogonalization of Common Factors.............................. Appendix 2: Compatibility of CAPM and APT...................................... Suggestions for Further Reading..............................................................
Books............................................................................................... Articles............................................................................................. 24 Strategic Portfolio Allocation................................................................. 991 24.1 Strategic Asset Allocation Based on Common Sense Rules. . . 992 24.1.1 Common Sense Rules.................................................... 993 24.1.2 Reactions to the Evolution of Market Conditions and of the Portfolio:Convex and Concave Strategies......... 996 24.2 Portfolio Insurance.......................................................................... 997 24.2.1 The Stop Loss Method..................................................... 998 24.2.2 Option-Based Portfolio Insurance................................... 999 24.2.3 CPPI Method..................................................................... 1005 24.2.4 Variants and Extensions of the Basic Methods.............. 1011 24.2.5 Portfolio Insurance, Financial Markets Volatility and Stability.............................................................. 1013 24.3 Dynamic Portfolio Optimization Models...................................... 1014 24.3.1 Dynamic Strategies: General Presentation and Optimization Models........................................ 1014 24.3.2 The Case of a Logarithmic Utility Function and the Optimal Growth Portfolio............................................... 1017 24.3.3 The Merton Model............................................................ 1020 24.3.4 The Model of Cox-
Huang and Karatzas-LehoczkyShreve............................................................................... 1022 963 964 964 966 966 967 968 976 976 977 979 980 982 982 983 984 985 987 988 989 989 990
xviii Contents 24.4 Summary............................................................................................ Suggestions for Further Reading................................................................. Books................................................................................................. Articles............................................................................................... 25 1026 1028 1028 1029 Benchmarking and Tactical Asset Allocation...................................... 1031 25.1 Benchmarking.................................................................................... 1031 25.1.1 Definitions and Classification According to the Tracking Error..................................................... 1032 25.1.2 Pure Index Funds and Trackers....................................... 1033 25.1.3 Replication Methods......................................................... 1033 25.1.4 Trackers or ETFs............................................................... 1034 25.2 Active Tactical Asset Allocation..................................................... 1035 25.2.1 Modeling and Solution to the Problem of an Active Manager Competing witha Benchmark........... 1035 25.2.2 Analysis of the Performance of Active Portfolio Management: Empirical Information Ratio, Market Timing, and Security Picking........................... 1038 25.2.3 Beta Coefficient Equal to 1.............................................. 1038 25.2.4 Beta Coefficient Different from 1.................................... 1040 25.2.5 Information Ratios, Sharpe
Ratio, and Active Portfolio Management Theory.......................... 1043 25.2.6 The Construction of a Maximum IR Portfolio from a Limited Number of Securities.............. 1043 25.2.7 The Construction of a Portfolio That Dominates the Benchmark (Higher Sharpe Ratio)............. 1045 25.2.8 Synthesis, Interpretation and Application to Portfolio Management........................................................ 1047 25.3 Alternative Investment Management and Hedge Funds.............. 1047 25.3.1 General Description of Hedge Funds and Alternative Investment........................................................... 1048 25.3.2 Definition of the Main Alternative Investment Styles.................................................................................. 1049 25.3.3 The Interest of Alternative Investment............................ 1051 25.3.4 The Particular Difficulties of MeasuringPerformance in Alternative Investment................................................. 1052 25.4 Summary........................................................................................... 1054 Appendix...................................................................................................... 1056 Breakdown of the Tracking Error and Performance Attribution........................................................................................ 1056 Suggestion for Reading............................................................................... 1059 Books................................................................................................ 1059
Articles.............................................................................................. 1059
Contents Part IV 26 xix Risk Management, Credit Risk, and Credit Derivatives Monte Carlo Simulations........................................................................ 26.1 Generation of a Sample from a Given Distribution Law............ 26.1.1 Sample Generation from a Given Probability Distribution...................................................................... 26.1.2 Construction of a Sample Taken from a Normal Distribution........................................................ 1065 26.2 Monte Carlo Simulations for a Single Risk Factor...................... 26.2.1 Dynamic Paths Simulation of T(t) and V(i, T(t)) in the Interval (0, T).............................................. 1065 26.2.2 Simulations of Y(T) and V(T, Ү{ТУ) at Time T (Static Simulations)....................................................... 1068 26.2.3 Applications..................................................................... 26.3 Monte Carlo Simulations for Several Risk Factors: Choleski Decomposition and Copulas.............................................. 1073 26.3.1 Simulation of a Multi-variate Normal Variable: Choleski Decomposition................................................. 26.3.2 Representation and Simulation of a Non-Gaussian Vector with Correlated Components Through the Use of a Copula............................................................... 26.3.3 General Definition of a Copula, and Student Copulasi)........................................................ 1080 26.3.4 Simulation of Trajectories............................................... 26.4 Accuracy,
Computation Time, and Some Variance Reduction Techniques...................................................................................... 26.4.1 Antithetic Variables........................................................ 26.4.2 Control Variate................................................................ 26.4.3 Importance Sampling...................................................... 26.4.4 Stratified Sampling.......................................................... 26.5 Monte Carlo and American Options.............................................. 26.5.1 General Description of the Problem and Methodology.................................................................... 26.5.2 Estimation of the Continuation Value by Regression (Carrière, Longstaff and Schwartz)................. 1091 26.5.3 Overview of the Carrière Approach............................... 26.5.4 Introduction to Longstaff and Schwartz Approach.... 26.6 Summary........................................................................................... Suggestion for Further Reading................................................................ Books............................................................................................... Articles............................................................................................. 1063 1064 1064 1065 1070 1073 1075 1081 1085 1086 1086 1088 1089 1089 1090 1093 1094 1099 1101 1101 1101
Contents XX 27 Value at Risk, Expected Shortfall, and Other Risk Measures . ... ПОЗ 27.1 Analytic Study of Value at Risk..................................................... 1105 27.1.1 The Problem of a Synthetic Risk Measure and Introduction to VaR............................................ 1105 27.1.2 Definition of the VaR, Interpretations, and Calculation Rules.................................................................... 1108 27.1.3 Analytic Expressions for the VaR in the Gaussian Case...................................................................... 1112 27.1.4 The Influence of Horizon h on the VaR of a Portfolio in the Absence or Presence of Serial Autocorrelation . . 1116 27.2 Estimating the VaR.......................................................................... 1120 27.2.1 Preliminary Analysis and Modeling of a Complex Position................................................................................. 1121 27.2.2 Estimating the VaR Through Simulations Based on Historical Data................................................................ 1123 27.2.3 Partial Valuation: Linear and Quadratic Approximations (the Delta-Normal and Delta-Gamma Methods)............................................................................... ИЗО 27.2.4 Calculating the VaR Using Monte Carlo Simulations........................................................................... 1138 27.2.5 Comparison Between the Different Methods................ 1141 27.3 Limitations and Drawbacks of the VaR, Expected Shortfall, Coherent Measures of Risk, and Portfolio
Risks.............. 1141 27.3.1 The Drawbacks of VaR Measures................................... 1142 27.3.2 An Improvement on the VaR: Expected Shortfall (or Tail-VaR, or C-VaR).................................................... 445 27.3.3 Coherent Risk Measures...................................................... 1148 27.3.4 Portfolio Risk Measures: Global, Marginal, and Incremental Risk................................................... 1150 27.4 Consequences of Non-normality and Analysis of Extreme Conditions............................................................................... 1155 27.4.1 Non-normal Distributions with Fat Tails and Correlation at the Extremes................................................ 1155 27.4.2 Distributions of Extreme Values........................................ 1159 27.4.3 Stress Tests and Scenario Analysis................................... 1164 27.5 Summary............................................................................................ 1166 Suggestions for Further Reading.................................................................. 1168 Books.................................................................................................. 1168 Articles................................................................................................ 1168 28 Modeling Credit Risk (1): Credit Risk Assessment and Empirical Analysis................................................................................................. 1171 28.1 Empirical Tools for Credit Risk Analysis.......................................
1172 28.1.1 Reminder of Basic Concepts, Empirical Observations, and Notations........................................................ 1172
Contents xxi 28.1.2 Historical (Empirical) Default Probabilities and Transition Matrix.............................................. 28.1.3 Risk-Neutral Default Probabilities Implicit in the Spread Curve and Discounting Methods in the Presence of Credit Risk.................................... 1179 28.2 Modeling Default Events and Valuation of Securities................ 28.2.1 Reduced-Form Approach (Intensity Models)................ 28.2.2 Structural Approach: Merton’s Model and Barrier Models............................................................... 1197 28.2.3 A Practical Application: the Valuation of Convertible Bonds................................................................. 1207 28.3 Summary......................................................................................... Appendix..................... :............................................................................. Suggestions for FurtherReading............................................................... Books............................................................................................... Articles............................................................................................. Website............................................................................................ 29 Modeling Credit Risk (2): Credit-VaR and Operational Methods for Credit Risk Management......................................................... 1221 29.1 Determining the Credit-VaR of an Asset: Overview and General
Principles.......................................................................... 29.2 Empirical Credit-VaR of an Asset Based on the Migration Matrix.................................................................................. 1224 29.2.1 Computation of the Credit-VaR of an Individual Asset................................................................... 1224 29.2.2 Limitationsof the Empirical Approach.......................... 29.3 Credit-VaR of an Individual Asset: Analytical Approaches Based on Asset Price Dynamics (MKMV...) and on Structural Models............................................................................................. 29.3.1 Asset Dynamics, Standardized Return, Default Probabilities, and Distance to Default............. 1229 29.3.2 Derivation of the Rating Migration Quantiles Associated with the Standardized Return....... 1230 29.3.3 Computation of the Distance to Default and Expected Default Frequency (MKMV-Moody’s Analytics Method)............................................................................. 29.3.4 Comparing the Two Approaches.................................... 29.3.5 Estimation of the Credit-VaR of an Asset Using EDF and a Valuation Model Based on RN-FN Probabilities....................................................... 1236 29.3.6 Relationship between Historical and RN Default Probabilities....................................................... 1238 29.4 Credit-VaR of an Entire Portfolio (Step 3) and Factor Models................................................................................. 1239 1176 1189 1189
1216 1219 1219 1219 1220 1220 1223 1227 1228 1233 1236
Contents xxii Marked-to-Market (МТМ) Models Involving Simulations.......................................................... 1240 29.4.2 A Single-Factor DM Model of the Credit Risk of a Perfectly Diversified Portfolio (.The Asymptotic Granular Vasicek-Gordy One-Factor Model). 1242 29.4.3 Extensions of the Asymptotic Single-Factor Granular Model................................................................... 1247 29.4.4 Alternative Approach: Modeling the Default Dependence Structure with a Copula............... 1250 29.4.5 Probability Distribution of the Default Dates Affecting a Portfolio............................................................ 1251 29.4.6 Portfolio Comprising Several Positions on the Same Obligor: Netting.................................................. 1253 29.5 Credit-VaR, Unexpected Loss and Economic Capital................. 29.5.1 Definition of Unexpected Loss (UL).............................. 29.5.2 Probability Threshold and Rating.................................... 29.6 Control and Regulation of Banking Risks..................................... 29.6.1 Regulators and the Basel Committee: General Presentation......................................................... 1258 29.6.2 Capital and liquidity Rules under Basel 3...................... 29.6.3 Pillar 1 Capital Requirements under Basel 3................. 29.6.4 Details on Pillar 1 Liquidity Requirements.................... 29.6.5 Additional Basel 3 Reflections and Reforms................. 29.7 Summary...........................................................................................
Appendix 1. Correlation of Defaults in a Portfolio of Debt Assets .... Appendix 2. Regulatory Capital, Market VaR, and Backtesting........... Appendix 3. Calculation of Regulatory Capital under the IRB Approach: Adjustment to the Infinitely Grained One-Factor Model. . . Suggestion for Further Reading................................................................. Books................................................................................................ Articles and Documentation........................................................... Websites............................................................................................ 29.4.1 30 Credit Derivatives, Securitization, and Introduction to xVA........... 30.1 Credit Derivatives............................................................................ 30.1.1 General Principles and Description of Credit Default Swaps.................................................................. 1281 30.1.2 Single-Name CDS Valuation Techniques...................... 30.2 Securitization.................................................................................... 30.2.1 Introduction to Securitization and ABS.......................... 30.2.2 ABS Tranching Structuration.......................................... 30.3 The “xVA” Framework.................................................................... 30.3.1 Counterparty Risk Exposure Measurement and Risk Mitigation Techniques....................................... 1314 30.3.2 Counterparty Risk Exposure Modeling Techniques.. . 1254 1254 1257 1257 1260 1261 1265
1266 1269 1271 1273 1274 1276 1276 1276 1277 1279 1280 1285 1306 1308 1311 1313 1319
Contents xxiii 30.3.3 Collateralized vs Non-collateralized Trades: Some Statistics............................................................................ 30.3.4 Introduction to CVA........................................................ 30.3.5 Introduction to DVA........................................................ 30.3.6 The FVA Puzzle............................................................... 30.4 Summary.......................................................................................... Appendix 1.................................................................................................. Asset Swap Analysis...................................................................... Suggestion for Further Reading................................................................ Books............................................................................................... Articles............................................................................................. Website: defaultrisk.com................................................................ 1324 1327 1332 1334 1339 1342 1342 1345 1345 1346 1346 Index.................................................................................................................... 1347
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Contents Part III 21 Portfolio Theory and Portfolio Management Choice Under Uncertainty and Portfolio Optimization in a Static Framework: The Markowitz Model. 21.1 Rational Choices Under Uncertainty: The Criteria of the Expected Utility and Mean-Variance. 21.1.1 The Expected Utility Criterion. 21.1.2 Some Features of Utility Functions. 21.1.3 Risk Aversion and Concavity of the Utility Function . 21.1.4 Some Standard Utility Functions. 21.1.5 The Mean-Variance Criterion. 21.2 Intuitive and Graphic Presentation of the Main Concepts of Portfolio Theoiy. 21.2.1 Assumptions, General Framework and Efficient Portfolios. 21.2.2 Two-Asset Portfolios. 21.2.3 Portfolios with N Securities. 21.2.4 Portfolio Diversification. 21.3 Mathematical Analysis of Efficient Portfolio Choices. 21.3.1 General Framework and Notations. 21.3.2 Efficient Portfolios and Portfolio Choice in the Absence of a Risk-Free Asset and of Portfolio Constraints. 21.3.3
Efficient Portfolios in the Presence of a Risk-Free Asset, with Allowed Short Positions; Tobin’s Two-Fund Separation. 21.4 Some Extensions of the Standard Model and Alternatives. . . . 21.4.1 Problems Implementing the Markowitz Model; The Black-Litterman Procedure. 21.4.2 Ban on Short Positions. 21.4.3 Separation Results When Investors Maximize Expected Utility But Do Not Follow the Mean-Variance Criterion (Cass and Stiglitz). 910 873 874 874 876 877 879 881 882 883 884 887 890 894 894 898 904 906 906 908 XV
Contents xvi Loss Aversion and Introduction to Behavioral Finance. 911 21.5 Summary. Appendix 1: The Axiomatic of Von Neuman and Morgenstem and Expected Utility. Al.l The Objects of Choice. Al.2 The Axioms ConcerningPreferences. A1.3 The Expected Utility Criterion. Al.4 Notes and Complements. Appendix 2: A Reminder of Quadratic Forms and the Calculation of Gradients. Appendix 3: Expectations, Variances and Covariances—Definitions and Calculation Rules. A3.1 Definitionsand Reminder. A3.2 CalculationRules. Appendix 4: Reminder on Optimization Methods Under Constraints . . . A4.1 Optimization When the Constraints Take the Form of Equalities. A4.2 Optimization Under Inequality Constraints. Suggestions for Further
Reading. Books. Articles. 21.4.4 22 The Capital Asset Pricing Model. 22.1 Derivation of the CAPM. 22.1.1 Hypotheses. 22.1.2 Intermediate Results in the Presence of a Risk-Free Asset. 931 22.1.3 The CAPM. 22.2 Applications of the CAPM. 22.2.1 Use of the CAPM for Financial Investment Purposes . . 22.2.2 Physical Investments by Firms. 22.2.3 Standard Performance Measures. 22.3 Extensions of the CAPM. 22.3.1 Merton’s Intertemporal CAPM. 22.3.2 International CAPM. 22.4 Limits of the CAPM. 22.4.1 Efficiency of the Market Portfolio and Roll’s Criticism. 22.4.2 Stability of
Betas. 22.5 Tests of the CAPM. 22.6 Summary. Suggestions for Further Reading. Books. Articles. 915 916 917 918 919 921 922 923 923 924 925 925 926 927 927 927 929 929 930 933 943 943 946 947 953 953 954 955 955 956 957 960 961 961 962
Contents xvii 23 Arbitrage Pricing Theory and Multi-factor Models. 23.1 Multi-factor Models. 23.1.1 Presentation of Models. 23.1.2 Portfolio Management Models in Practice. 23.2 Arbitrage Pricing Theory. 23.2.1 Assumptions and Notations. 23.2.2 The APT. 23.2.3 Relationship with the CAPM. 23.3 APT Applications and the Fama-French Model. 23.3.1 Implementation of Multi-factor Models and APT. . . . 23.3.2 Portfolio Selection. 23.3.3 The Three-Factor Model of Fama and French. 23.4 Econometric Tests and Comparison of Models. 23.4.1 Tests of the APT. 23.4.2 Empirical and Practical CAPM-APT Comparison. 23.4.3 Comparison of Factor Models. 23.5 Summary. Appendix 1 : Orthogonalization of Common Factors. Appendix 2: Compatibility of CAPM and APT. Suggestions for Further Reading.
Books. Articles. 24 Strategic Portfolio Allocation. 991 24.1 Strategic Asset Allocation Based on Common Sense Rules. . . 992 24.1.1 Common Sense Rules. 993 24.1.2 Reactions to the Evolution of Market Conditions and of the Portfolio:Convex and Concave Strategies. 996 24.2 Portfolio Insurance. 997 24.2.1 The Stop Loss Method. 998 24.2.2 Option-Based Portfolio Insurance. 999 24.2.3 CPPI Method. 1005 24.2.4 Variants and Extensions of the Basic Methods. 1011 24.2.5 Portfolio Insurance, Financial Markets Volatility and Stability. 1013 24.3 Dynamic Portfolio Optimization Models. 1014 24.3.1 Dynamic Strategies: General Presentation and Optimization Models. 1014 24.3.2 The Case of a Logarithmic Utility Function and the Optimal Growth Portfolio. 1017 24.3.3 The Merton Model. 1020 24.3.4 The Model of Cox-
Huang and Karatzas-LehoczkyShreve. 1022 963 964 964 966 966 967 968 976 976 977 979 980 982 982 983 984 985 987 988 989 989 990
xviii Contents 24.4 Summary. Suggestions for Further Reading. Books. Articles. 25 1026 1028 1028 1029 Benchmarking and Tactical Asset Allocation. 1031 25.1 Benchmarking. 1031 25.1.1 Definitions and Classification According to the Tracking Error. 1032 25.1.2 Pure Index Funds and Trackers. 1033 25.1.3 Replication Methods. 1033 25.1.4 Trackers or ETFs. 1034 25.2 Active Tactical Asset Allocation. 1035 25.2.1 Modeling and Solution to the Problem of an Active Manager Competing witha Benchmark. 1035 25.2.2 Analysis of the Performance of Active Portfolio Management: Empirical Information Ratio, Market Timing, and Security Picking. 1038 25.2.3 Beta Coefficient Equal to 1. 1038 25.2.4 Beta Coefficient Different from 1. 1040 25.2.5 Information Ratios, Sharpe
Ratio, and Active Portfolio Management Theory. 1043 25.2.6 The Construction of a Maximum IR Portfolio from a Limited Number of Securities. 1043 25.2.7 The Construction of a Portfolio That Dominates the Benchmark (Higher Sharpe Ratio). 1045 25.2.8 Synthesis, Interpretation and Application to Portfolio Management. 1047 25.3 Alternative Investment Management and Hedge Funds. 1047 25.3.1 General Description of Hedge Funds and Alternative Investment. 1048 25.3.2 Definition of the Main Alternative Investment Styles. 1049 25.3.3 The Interest of Alternative Investment. 1051 25.3.4 The Particular Difficulties of MeasuringPerformance in Alternative Investment. 1052 25.4 Summary. 1054 Appendix. 1056 Breakdown of the Tracking Error and Performance Attribution. 1056 Suggestion for Reading. 1059 Books. 1059
Articles. 1059
Contents Part IV 26 xix Risk Management, Credit Risk, and Credit Derivatives Monte Carlo Simulations. 26.1 Generation of a Sample from a Given Distribution Law. 26.1.1 Sample Generation from a Given Probability Distribution. 26.1.2 Construction of a Sample Taken from a Normal Distribution. 1065 26.2 Monte Carlo Simulations for a Single Risk Factor. 26.2.1 Dynamic Paths Simulation of T(t) and V(i, T(t)) in the Interval (0, T). 1065 26.2.2 Simulations of Y(T) and V(T, Ү{ТУ) at Time T (Static Simulations). 1068 26.2.3 Applications. 26.3 Monte Carlo Simulations for Several Risk Factors: Choleski Decomposition and Copulas. 1073 26.3.1 Simulation of a Multi-variate Normal Variable: Choleski Decomposition. 26.3.2 Representation and Simulation of a Non-Gaussian Vector with Correlated Components Through the Use of a Copula. 26.3.3 General Definition of a Copula, and Student Copulasi). 1080 26.3.4 Simulation of Trajectories. 26.4 Accuracy,
Computation Time, and Some Variance Reduction Techniques. 26.4.1 Antithetic Variables. 26.4.2 Control Variate. 26.4.3 Importance Sampling. 26.4.4 Stratified Sampling. 26.5 Monte Carlo and American Options. 26.5.1 General Description of the Problem and Methodology. 26.5.2 Estimation of the Continuation Value by Regression (Carrière, Longstaff and Schwartz). 1091 26.5.3 Overview of the Carrière Approach. 26.5.4 Introduction to Longstaff and Schwartz Approach. 26.6 Summary. Suggestion for Further Reading. Books. Articles. 1063 1064 1064 1065 1070 1073 1075 1081 1085 1086 1086 1088 1089 1089 1090 1093 1094 1099 1101 1101 1101
Contents XX 27 Value at Risk, Expected Shortfall, and Other Risk Measures . . ПОЗ 27.1 Analytic Study of Value at Risk. 1105 27.1.1 The Problem of a Synthetic Risk Measure and Introduction to VaR. 1105 27.1.2 Definition of the VaR, Interpretations, and Calculation Rules. 1108 27.1.3 Analytic Expressions for the VaR in the Gaussian Case. 1112 27.1.4 The Influence of Horizon h on the VaR of a Portfolio in the Absence or Presence of Serial Autocorrelation . . 1116 27.2 Estimating the VaR. 1120 27.2.1 Preliminary Analysis and Modeling of a Complex Position. 1121 27.2.2 Estimating the VaR Through Simulations Based on Historical Data. 1123 27.2.3 Partial Valuation: Linear and Quadratic Approximations (the Delta-Normal and Delta-Gamma Methods). ИЗО 27.2.4 Calculating the VaR Using Monte Carlo Simulations. 1138 27.2.5 Comparison Between the Different Methods. 1141 27.3 Limitations and Drawbacks of the VaR, Expected Shortfall, Coherent Measures of Risk, and Portfolio
Risks. 1141 27.3.1 The Drawbacks of VaR Measures. 1142 27.3.2 An Improvement on the VaR: Expected Shortfall (or Tail-VaR, or C-VaR). 445 27.3.3 Coherent Risk Measures. 1148 27.3.4 Portfolio Risk Measures: Global, Marginal, and Incremental Risk. 1150 27.4 Consequences of Non-normality and Analysis of Extreme Conditions. 1155 27.4.1 Non-normal Distributions with Fat Tails and Correlation at the Extremes. 1155 27.4.2 Distributions of Extreme Values. 1159 27.4.3 Stress Tests and Scenario Analysis. 1164 27.5 Summary. 1166 Suggestions for Further Reading. 1168 Books. 1168 Articles. 1168 28 Modeling Credit Risk (1): Credit Risk Assessment and Empirical Analysis. 1171 28.1 Empirical Tools for Credit Risk Analysis.
1172 28.1.1 Reminder of Basic Concepts, Empirical Observations, and Notations. 1172
Contents xxi 28.1.2 Historical (Empirical) Default Probabilities and Transition Matrix. 28.1.3 Risk-Neutral Default Probabilities Implicit in the Spread Curve and Discounting Methods in the Presence of Credit Risk. 1179 28.2 Modeling Default Events and Valuation of Securities. 28.2.1 Reduced-Form Approach (Intensity Models). 28.2.2 Structural Approach: Merton’s Model and Barrier Models. 1197 28.2.3 A Practical Application: the Valuation of Convertible Bonds. 1207 28.3 Summary. Appendix. :. Suggestions for FurtherReading. Books. Articles. Website. 29 Modeling Credit Risk (2): Credit-VaR and Operational Methods for Credit Risk Management. 1221 29.1 Determining the Credit-VaR of an Asset: Overview and General
Principles. 29.2 Empirical Credit-VaR of an Asset Based on the Migration Matrix. 1224 29.2.1 Computation of the Credit-VaR of an Individual Asset. 1224 29.2.2 Limitationsof the Empirical Approach. 29.3 Credit-VaR of an Individual Asset: Analytical Approaches Based on Asset Price Dynamics (MKMV.) and on Structural Models. 29.3.1 Asset Dynamics, Standardized Return, Default Probabilities, and Distance to Default. 1229 29.3.2 Derivation of the Rating Migration Quantiles Associated with the Standardized Return. 1230 29.3.3 Computation of the Distance to Default and Expected Default Frequency (MKMV-Moody’s Analytics Method). 29.3.4 Comparing the Two Approaches. 29.3.5 Estimation of the Credit-VaR of an Asset Using EDF and a Valuation Model Based on RN-FN Probabilities. 1236 29.3.6 Relationship between Historical and RN Default Probabilities. 1238 29.4 Credit-VaR of an Entire Portfolio (Step 3) and Factor Models. 1239 1176 1189 1189
1216 1219 1219 1219 1220 1220 1223 1227 1228 1233 1236
Contents xxii Marked-to-Market (МТМ) Models Involving Simulations. 1240 29.4.2 A Single-Factor DM Model of the Credit Risk of a Perfectly Diversified Portfolio (.The Asymptotic Granular Vasicek-Gordy One-Factor Model). 1242 29.4.3 Extensions of the Asymptotic Single-Factor Granular Model. 1247 29.4.4 Alternative Approach: Modeling the Default Dependence Structure with a Copula. 1250 29.4.5 Probability Distribution of the Default Dates Affecting a Portfolio. 1251 29.4.6 Portfolio Comprising Several Positions on the Same Obligor: Netting. 1253 29.5 Credit-VaR, Unexpected Loss and Economic Capital. 29.5.1 Definition of Unexpected Loss (UL). 29.5.2 Probability Threshold and Rating. 29.6 Control and Regulation of Banking Risks. 29.6.1 Regulators and the Basel Committee: General Presentation. 1258 29.6.2 Capital and liquidity Rules under Basel 3. 29.6.3 Pillar 1 Capital Requirements under Basel 3. 29.6.4 Details on Pillar 1 Liquidity Requirements. 29.6.5 Additional Basel 3 Reflections and Reforms. 29.7 Summary.
Appendix 1. Correlation of Defaults in a Portfolio of Debt Assets . Appendix 2. Regulatory Capital, Market VaR, and Backtesting. Appendix 3. Calculation of Regulatory Capital under the IRB Approach: Adjustment to the Infinitely Grained One-Factor Model. . . Suggestion for Further Reading. Books. Articles and Documentation. Websites. 29.4.1 30 Credit Derivatives, Securitization, and Introduction to xVA. 30.1 Credit Derivatives. 30.1.1 General Principles and Description of Credit Default Swaps. 1281 30.1.2 Single-Name CDS Valuation Techniques. 30.2 Securitization. 30.2.1 Introduction to Securitization and ABS. 30.2.2 ABS Tranching Structuration. 30.3 The “xVA” Framework. 30.3.1 Counterparty Risk Exposure Measurement and Risk Mitigation Techniques. 1314 30.3.2 Counterparty Risk Exposure Modeling Techniques. . 1254 1254 1257 1257 1260 1261 1265
1266 1269 1271 1273 1274 1276 1276 1276 1277 1279 1280 1285 1306 1308 1311 1313 1319
Contents xxiii 30.3.3 Collateralized vs Non-collateralized Trades: Some Statistics. 30.3.4 Introduction to CVA. 30.3.5 Introduction to DVA. 30.3.6 The FVA Puzzle. 30.4 Summary. Appendix 1. Asset Swap Analysis. Suggestion for Further Reading. Books. Articles. Website: defaultrisk.com. 1324 1327 1332 1334 1339 1342 1342 1345 1345 1346 1346 Index. 1347 |
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| spelling | Poncet, Patrice 1949- Verfasser (DE-588)170208885 aut Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk Volume 2 Patrice Poncet, Roland Portait ; contributions by Igor Toder Cham, Switzerland Springer [2022] xxxvii, Seiten 872-1364 Diagramme txt rdacontent n rdamedia nc rdacarrier Springer texts in business and economics Portait, Roland Verfasser (DE-588)170766292 aut Toder, Igor ctb (DE-604)BV048585467 2 Erscheint auch als Online-Ausgabe 978-3-030-84600-8 Digitalisierung UB Regensburg - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=033961296&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Poncet, Patrice 1949- Portait, Roland Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk |
| title | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk |
| title_auth | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk |
| title_exact_search | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk |
| title_exact_search_txtP | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk |
| title_full | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk Volume 2 Patrice Poncet, Roland Portait ; contributions by Igor Toder |
| title_fullStr | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk Volume 2 Patrice Poncet, Roland Portait ; contributions by Igor Toder |
| title_full_unstemmed | Capital market finance an introduction to primitive assets, derivatives, portfolio management and risk Volume 2 Patrice Poncet, Roland Portait ; contributions by Igor Toder |
| title_short | Capital market finance |
| title_sort | capital market finance an introduction to primitive assets derivatives portfolio management and risk |
| title_sub | an introduction to primitive assets, derivatives, portfolio management and risk |
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