correlation

Hello. I wonder if my understanding is correct with regards to the impact of intra-tranche default correlation on value of different CDO tranches. 1. Equity tranche: when correlation increases, the value of the tranche increases because now there is higher chance of the underlying assets...

Hi, I have a doubt about the meaning of the hedge ratio. Hedge ratio = ρ * σ_spot / σ_fut Number of contracts = HedgeRatio * PortfolioValue / ValueFuturesContract Therefore, the lower the correlation, the lower the number of contracts. So, let's say that I have a portfolio of $ 1.000.000 of...

Dear David I have attached a spreadsheet in which I have calculated copula correlations for a Bi Variate Normal distribution and have inserted a chart on the same. I would be extremely happy if you could have a look at the same and tell me if my understanding is correct. I have used the same...

Learning outcomes: Describe how equity correlations and correlation volatilities behave throughout various economic states. Calculate a mean reversion rate using standard regression and calculate the corresponding autocorrelation. Identify the best-fit distribution for equity, bond, and default...

Learning Outcomes: Explain how correlation contributed to the global financial crisis of 2007 to 2009.Explain the role of correlation risk in market, credit, systemic, and concentration risk. Questions: 502.1. Your colleague Mary conveys to you that she has computed a Pearson correlation...

Learning outcome: Describe financial correlation risk and the areas in which it appears in finance. Questions: 501.1. Below are displayed seven pairs of (A,B) variables; e.g., (3,5), (4,4)...(7,1). The third row shows pairwise products; e.g., 3*5 = 15, 4*4 = 16. Finally, the mean, E(.), and...

AIM: Define, calculate, and interpret the covariance and correlation between two random variables. Questions: 304.1. Two assets, X and Y, produce only three joint outcomes: Prob[X = -3.0%, Y = -2.0%] = 30%, Prob[X = +1.0%, Y = +2.0%] = 50%, and Prob[X = +5.0%, Y = +3.0%] = 20%: What is...