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The RiskMetrics 2006 Methodology
Company: RiskMetrics Group
Company Url: Click here to open
Year Of Publication: 2007
Month Of Publication: March
Pages: 63
Download Count: 23
View Count: 1503
Comment Num: 0
Language: English
Source: working paperr
Who Can Read: Free
Date: 8-29-2011
Publisher: Administrator
Summary
The new RM2006 methodology to evaluate market risks is introduced. It is designed to be more accurate than the existing methodologies, and to be able to reach long risk horizons, up to one year. Consistency across risk horizons is obtained by building the methodology using a long memory ARCH process to compute the required forecasts. A large data set covering the main asset classes and geographical areas is used to validate the various sub-components of the methodology. Extensive backtesting using probtiles is done to assess the final performance, as well as the contributions of the various parts. One key quantitative result is that the new methodology applied to a risk horizon of three months is more accurate than the exponential moving average scheme at a risk horizon of one day. This quantitative improvement allows us to analyse risks in a portfolio both at tactical and strategic time horizons.
Author(s)
Zumbach, Gilles Sign in to follow this author
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