Integrated Risk Management with a Filtered Bootstrap Approach |
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Authors: | Claudio Marsala† –Massimiliano Pallotta† –Raffaele Zenti† |
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Institution: | Claudio Marsala*?,–Massimiliano Pallotta?,–Raffaele Zenti? |
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Abstract: | We present a multi-period risk model to measure portfolio risk that integrates market risk, credit risk and, in a simplified way, liquidity risk. Thus, it overcomes the major limitation currently shared by many risk models that are unable to give a complete picture of all portfolio risks according to a single, coherent framework. The model is based on the Filtered Bootstrap approach; hence, it captures conditional heteroskedasticity, serial correlation and non-normality in the risk factors, that is, most of the features of observed financial time series. Being a simulation risk model, it copes in a natural way with derivatives as it allows the full valuation of the probability density function of the contracts. In addition, it is a suitable and flexible way to generate future scenarios on medium‐term horizons, so this model is particularly appropriate for asset management companies. |
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Keywords: | C14 C15 G00 |
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