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Conv by: David Rowe
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by David Rowe - Sungard on Apr 20, 2007 - 11:00 AM read 352 times
Source: http://www4.sungard.com/blogs/riskManagement/?p=3#comment... 		External

Santosh,

I really don’t have much to say on the topic of alpha and CVaR. My main point would be that a simple beta to the market is likely to be insufficient to capture all the potential concentration risk. Some estimation based on a richer set of drivers, including possibly industry and regional indicators, is likely to be needed for a CVaR estimate to be justified in treating the idiosyncratic risk as reliably uncorrelated across different obligors. Given that we continue to argue about what alpha really encompasses, it doesn’t strike me as likely that we can model it effectively in a risk exercise such as CVaR.


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