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Hedging against Risk in a Heterogeneous Leveraged Market
Galanis, Giorgos / Karlis, Alexandros / Terovitis, Spyridon / Turner, Matthew
interest rates / systemic riskResource overview

Hedging against Risk in a Heterogeneous Leveraged Market

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by Galanis, Giorgos, Karlis, Alexandros, Terovitis, Spyridon, Turner, Matthew

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interest ratessystemic risk

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Suggested foundations for risk measurement and stress and rates and fixed income. Specialist prerequisites vary by paper.

Before you read

  1. Random Variables and Distributions

    Represent losses as a distribution rather than one forecast.

  2. Expected Shortfall and Other Tail Risk Measures

    Distinguish a loss quantile from the average loss in the tail.

  3. The Bank Account, Short Rate, and the Fundamental Pricing Equation

    Understand discounting in a stochastic-rate model.

  4. DV01, Dollar Duration, and One-Factor Price Sensitivity

    Translate yield movements into first-order price risk.

Go further

  1. VaR Estimation in Practice: Variance-Covariance, Historical Simulation, Monte Carlo

    Compare risk estimators and their assumptions.

  2. Backtesting VaR and ES: Coverage Tests and Model Validation

    Check forecasts against realised losses.

  3. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

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