Anticipating Correlations (eBook)

A New Paradigm for Risk Management

Robert Engle (Autor)

eBook Download: PDF

2009
176 Seiten
Princeton University Press (Verlag)
978-1-4008-3019-0 (ISBN)

Infos

Financial markets respond to information virtually instantaneously. Each new piece of information influences the prices of assets and their correlations with each other, and as the system rapidly changes, so too do correlation forecasts. This fast-evolving environment presents econometricians with the challenge of forecasting dynamic correlations, which are essential inputs to risk measurement, portfolio allocation, derivative pricing, and many other critical financial activities. In Anticipating Correlations, Nobel Prize-winning economist Robert Engle introduces an important new method for estimating correlations for large systems of assets: Dynamic Conditional Correlation (DCC). Engle demonstrates the role of correlations in financial decision making, and addresses the economic underpinnings and theoretical properties of correlations and their relation to other measures of dependence. He compares DCC with other correlation estimators such as historical correlation, exponential smoothing, and multivariate GARCH, and he presents a range of important applications of DCC. Engle presents the asymmetric model and illustrates it using a multicountry equity and bond return model. He introduces the new FACTOR DCC model that blends factor models with the DCC to produce a model with the best features of both, and illustrates it using an array of U.S. large-cap equities. Engle shows how overinvestment in collateralized debt obligations, or CDOs, lies at the heart of the subprime mortgage crisis--and how the correlation models in this book could have foreseen the risks. A technical chapter of econometric results also is included. Based on the Econometric and Tinbergen Institutes Lectures, Anticipating Correlations puts powerful new forecasting tools into the hands of researchers, financial analysts, risk managers, derivative quants, and graduate students.

Autor

Robert Engle is the Michael Armellino Professor in the Management of Financial Services at New York University's Leonard N. Stern School of Business. His books include Cointegration, Causality, and Forecasting. He was awarded the 2003 Nobel Prize in economics.

Produkt-Details

• Erscheint lt. Verlag: 19.1.2009
• Reihe/Serie: The Econometric and Tinbergen Institutes Lectures
• Reihe/Serie: The Econometric and Tinbergen Institutes Lectures
• Zusatzinfo: 30 line illus.
• Verlagsort: Princeton
• Sprache: englisch
• Themenwelt: Naturwissenschaften
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Allgemeines / Lexika
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre ► Ökonometrie
• Schlagworte: Accuracy and precision • arbitrage pricing theory • autocorrelation • Autoregressive conditional heteroskedasticity • Basis Point • Bayesian • Bayesian information criterion • Bias of an estimator • Capital Asset Pricing Model • Conditional variance • Copula (probability theory) • Correlation and dependence • Correlation swap • Covariance matrix • Credit Derivative • credit risk • Cross product • Cumulative distribution function • data set • Default rate • Determinant • dividend • Dummy variable (statistics) • Economics • Elliptical distribution • Empirical distribution function • Equity Market • Equity Value • estimation • Estimator • Exchange Rate • expected value • exponential smoothing • Extreme risk • extreme value theory • Factor Analysis • Fat-tailed distribution • Forecasting • Free parameter • Hedge Fund • High-yield debt • implied volatility • inference • insurance • Interest Rate • Joint probability distribution • Laplace distribution • Least Squares • Likelihood Function • Likelihood-ratio test • Long run and short run • Macroeconomics • Marginal distribution • market capitalization • market portfolio • maximum likelihood estimation • Mean absolute error • monetary policy • Monotonic Function • Moving-average model • multivariate model • Multivariate normal distribution • Normal distribution • Ordinary Least Squares • Parameter • Pearson product-moment correlation coefficient • portfolio optimization • Present Value • Pricing • Principal Component Analysis • Probability • Probability of Default • Quantile • Random Variable • Rank correlation • Recession • Reconstitution • risk analysis • Risk Aversion • Risk Management • Risk Premium • Skewness • smoothing • Spearman's rank correlation coefficient • standard deviation • stationary distribution • Stochastic volatility • Structured product • Summation • Swap rate • Synthetic CDO • Tail Dependence • Time Series • tranche • t-statistic • unit root • Valuation (finance) • Variable (mathematics) • Variance • Weighted arithmetic mean
• ISBN-10: 1-4008-3019-2 / 1400830192
• ISBN-13: 978-1-4008-3019-0 / 9781400830190