KTH Matematik  

Matematisk Statistik

Tid: 8 April 2010 kl 15.15-16.00.

Plats : Matematiks sammanträdesrum 3424 (innanför pausrummet), Institutionen för matematik, KTH, Lindstedts väg 25. (observera dagen och lokalen), Karta!

Föredragshållare: Joakim Ahlinder och Magnus Hanson

Titel: Portfolio Risk Measures over Time (Examensarbete – Master thesis)


The main purpose of this master thesis, commissioned by Handelsbanken, is to provide a framework for estimation of Value-at-Risk in fixed income portfolios over time-horizons exceeding one day. We conduct a comparative study of various methods of scaling one day Value-at-Risk and their respective performance, focusing on time-horizons of ten days, three months and one year, taking into consideration the specific challenges of fixed income asset classes. We also investigate Value-at-Risk scaling in the setting of non-stationary portfolio weights, concentrating on the dynamic hedging strategy CPPI.

We find that the square-root-of-time rule performs relatively well in a majority of cases, both on simulated data and on real fixed income index data. Combined with other methods, such as bootstrap, and using a two-step method, scaling Value-at-Risk to three months and one year works well for low volatility assets, less so for more volatile assets with large jumps in price.

The implementation of CPPI shows an expected change in the distribution of the returns, where we see less large drops in the portfolio value accompanied by a decrease in the expected return; however, we also see an increase in complexity and assumptions which one has to address when deciding if the implementation of a so-called Management Action structure is appropriate.

The full report (pdf)

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Sidansvarig: Filip Lindskog
Uppdaterad: 25/02-2009