bionicturtle's Channel

bionicturtle's Channel


  • 1
    Metallgesellschaft Case on Hedging Disasters 06:19

    Metallgesellschaft Case on Hedging Disasters

    by bionicturtle (11/10/08) 694 views

    In MG, the underlyings were short positions in long-term forward contracts to deliver oil. The hedge was a stack-and-roll hedge: long positions in short-term futures contracts that were rolled over consecutively. The strategy depended on the continuation of (i) stable or gently increasing spot oil prices and (ii) backwardation

  • 3
    Best Hedge 05:55

    Best Hedge

    by bionicturtle (11/6/08) 59 views

    The best hedge is based on portfolio volatility in the mean-variance framework. Specifically, 1. Given a current portfolio with value (W), and 2. Given an asset (A) with correlation (rho) to the portfolio, 3. What is the trade that produces the minimum volatility for the new portfolio (W+a)?

  • 4
    Risk-adjusted Performance Ratios 09:46

    Risk-adjusted Performance Ratios

    by bionicturtle (11/5/08) 284 views

    RAPMs are variations of: return per unit of risk. Treynor and Sharpe are similar: both are excess return per unit of risk. Treynor defines risk as systematic risk (beta) and is therefore appropriate to well-diversified portfolios (i.e., into such portfolios idiosyncratic risk is eliminated); Sharpe defines risk as total risk (volatility). Jensen’s alpha is outperformance relative to expected performance under CAPM.

  • 6
    Capital Market Line (CML)

    Capital Market Line (CML)

    by bionicturtle (11/3/08) 628 views

    The capital market line is determined by a mix of: the riskfree asset and the market portfolio. The market portfolio, in turn, consists of all risky assets (this example has only two assets).

  • 9
    CreditMetrics - Part 2 09:23

    CreditMetrics - Part 2

    by bionicturtle (10/29/08) 96 views

    The next building block is mapping transitional probabilities to standard normal variables; then using a bivariate normal to capture joint probabilities of default

  • Load More