A Tractable Model to Measure Sector Concentration Risk in Credit Portfolios

We explore a simplified version of the value-at-risk approximation developed by Pykhtin (Risk Magazine, March, 85–90, 2004), which only requires risk parameters on a sector level. We measure the impact of credit concentrations in business sectors on the economic capital of credit portfolios. We base our portfolios’ sector composition on credit information from the German central credit register. Our results show that the approximation formula performs well for fine-grained portfolios that are homogeneous on a sector level in terms of probability of default (PD) and exposure size. We explore the robustness of our results for portfolios which are heterogeneous in terms of these two characteristics. We find that low granularity ceteris paribus causes the approximation formula to underestimate economic capital, whereas heterogeneity in individual PDs causes overestimation. Indicative results imply that in typical credit portfolios of banks, PD heterogeneity will at least compensate for the granularity effect. This result suggests that the approximation estimates economic capital reasonably well and/or errs on the conservative side.     

Heilende Düfte

Aroma?le in der Kinderkrankenpflege - S?uglinge und Aromapflege – geht das zusammen? Inwieweit lassen sich ?therische ?le auch bei Babys und Kindern anwenden? Melanie Ullrich und Ulrike Landschütz zeigen M?glichkeiten auf.     

Editorial

Ohne Zusammenfassung     

Rating model arbitrage in CDO markets: An empirical analysis

We analyze whether information asymmetry between issuers and investors leads to rating model arbitrage in Collateralized Debt Obligation markets. Rating model arbitrage is defined as the issuer's deliberate capitalization of information asymmetry at the investor's cost on the basis of different rating processes. Using data from CDO transactions grouped by both rating agencies and underlying rating methodologies, we test for homogeneity of characteristic transaction features within the group and heterogeneity between the different groups. We find that the hypothesis stating non-existence of rating model arbitrage on the basis of information asymmetry does not hold as individual patterns of transaction characteristics within each group could be identified.     

Zuwendung inbegriffen

Besser leben im Heim - Pflegekr?fte arbeiten oft unter Zeitdruck. Um die Lebensqualit?t von Bewohnern mit erheblich eingeschr?nkter Alltagskompetenz zu verbessern, sieht der Gesetzgeber im Pflege-Weiterentwicklungsgesetz vom 1. Juli 2008 zus?tzliche Betreuungskr?fte vor. Im Rummelsberger Stift St. Lorenz in Nürnberg macht man mit ihnen positive Erfahrungen.     

Co-movements of index options and futures quotes

We report evidence that the co-movements of index options and index futures quotes differ sharply from perfect correlation in periods with option trades. In half-hour intervals with (without) option trades 25% (12%) of call option quote changes have either the opposite sign or are larger in magnitude than the corresponding index futures quote changes. We calibrate a stochastic volatility model that allows for trade and no-trade periods using real data and simulate the joint co-movements of index quotes and option quotes in this model. We show that for trade intervals the observed co-movements differ from the benchmark case established by our simulations approximately three times too often. We provide empirical evidence that market microstructure effects – specifically, stale quotes and aggressive quotes – explain the majority of the deviations from the benchmark. Our findings are relevant for techniques that use estimates of local co-movements as inputs to price or hedge options.     

Open Innovation und Beziehungsmanagement bei Henkel

Eine Open-Innovation-Strategie greift auf externes Wissen zurück und steigert dadurch die unternehmensinterne Innovationskraft. Um auf externe Wissensquellen zurückzugreifen, stehen zahlreiche unterschiedliche Methoden zur Verfügung. Dieser Beitrag zeigt, zu welchem Zeitpunkt im Innovationsprozess bei Henkel welche Methoden eingesetzt werden und welche überlegungen dahinter stehen.