Anticipating correlations : a new paradigm for risk management / Robert Engle.

Format:

Book

Author/Creator:

Engle, R. F. (Robert F.)

Series:

Econometric Institute lectures

[The Econometric Institute lectures]

Language:

English

Subjects (All):

Finance--Econometric models.

Finance.

Economic forecasting--Mathematical models.

Economic forecasting.

Risk management--Mathematical models.

Risk management.

Correlation (Statistics).

Physical Description:

vi, 154 pages : illustrations ; 25 cm.

Place of Publication:

Princeton : Princeton University Press, [2009]

Contents:

1 Correlation Economics 1

1.1 Introduction 1

1.2 How Big Are Correlations? 3

1.3 The Economic of Correlations 6

1.4 An Economic Model of Correlations 9

1.5 Additional Influences on Correlations 13

2 Correlations in Theory 15

2.1 Conditional Correlations 15

12.2 Copulas 17

12.3 Dependence Measures 21

12.4 On the Value of Accurate Correlations 25

3 Models for Correlations 29

3.1 The Moving Average and the Exponential Smoother 30

3.2 Vector GARCH 32

3.3 Martix Formulations and Results for Vector GRACH 33

3.4 Constant Conditional Correlation 37

3.5 Orthogonal GARCH 37

3.6 Dynamic Conditional Correlation 39

3.7 Alternative Approaches and Expanded Data Sets 41

4 Dynamic Conditional Correlation 43

4.1 DE-GARCHING 43

4.2 Estimating the Quasi-Correlations 45

4.3 Rescaling in DCC 48

4.4 Estimation of the DCC Model 55

5 DCC Performance 59

5.1 Monte Carlo Performance of DCC 59

5.2 Empirical Performance 61

6 The MacGyver Method 74

7 Generalized DCC Models 80

7.1 Theoretical Specification 80

7.2 Estimating Correlations for Global Stock and Bond Returns 83

8 Factor DCC 88

8.1 Formulation of Factor Versions of DCC 88

8.2 Estimation of Factor Models 93

9 Anticipating Correlations 103

9.2 Forecasting 103

9.2 Long-Run Forecasting 108

9.3 Hedging Performance In-Sample 111

9.4 Out-of-Sample Hedging 112

9.5 Forecasting Risk in the Summer of 2007 117

10 Credit Risk and Correlations 122

11 Economic Analysis of the DCC Model 130

11.1 Variance Targeting 130

11.2 Correlation Targeting 131

11.3 Asymptotic Distribution of DCC 134.

Notes:

Series from jacket.

Includes bibliographical references (pages [141]-149) and index.

ISBN:

9780691116419

0691116415

OCLC:

269434476