by Enrique G. Mendoza, Jessica Roldan-Pena, Julio Carrillo, Victoria Nuguer
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Suggested foundations for asset pricing and factor research and risk measurement and stress. Specialist prerequisites vary by paper.
Interpret exposures, residuals and uncertainty in fitted coefficients.
Work with returns and recognise their empirical limitations.
Represent losses as a distribution rather than one forecast.
Distinguish a loss quantile from the average loss in the tail.
Connect factor definitions to portfolio construction.
Distinguish exposure estimation from tests of expected returns.
Compare risk estimators and their assumptions.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.