Two papers by actuaries on this topic: https://www.cambridge.org/core/journals/british-actuarial-journal/article/assetliability-modelling-in-the-quantum-era/53D6CE564A4FFC1FBED5EBF8FEB1C491 https://www.cambridge.org/core/journals/british-actuarial-journal/article/quantum-internal-models-for-solvency...

Using overlapping data introduces a bias in the standard deviation of variance estimates you might want to correct for (it understates the standard deviation). Cochrane adjustment corrects for this and there are other similar adjustments: https://www.cambridge.org/core/journals/british-actuarial-jou...

Hello - please can I ask if you have good recommendation for references for risk neutral calibration of the Libor Market Model?

It is a feature of Solvency II regulations for insurers that a full distribution is needed of each risk.  For defaults and downgrade risk for corporate bonds this means a transition matrix is needed at all percentile.  Some firms have used models like the Vasicek model (as outlined by Belkin) to do ...

I would like to interpolate between two 8*8 matrices.  These are two transition matrices used for corporate bonds, with probabilities of moving between the ratings and to default.  
It is possible to use linear interpolation, but it has some distortion effects.  Is there a better way to do this?

I have been using the Belkin approach to calibration the Vasicek credit transition matrix model as outlined here: https://www.z-riskengine.com/media/1037/the-effect-of-systematic-credit-risk-on-loan-portfolios-and-loan-pricing.pdf Does anyone know of a similar paper describing how to calibrate a mod...

Hello, I am looking for data on how frequently callable bonds are called at the first call date or otherwise.  I have seen examples such as deutsche bank in 2008 not calling.  https://www.bondvigilantes.com/blog/2008/12/17/who-cares-about-the-fed-deutsche-bank-didnt-call-one-of-their-bonds-this-morn...

<t>I wondered if anyone knows the split between senior and subordinated bonds in the Merrill Lynch corporate bond indices.For example the BBB 5-7 year index - what proportion of bonds in this index are senior and subordinated?It sounds a long shot someone might know, but I could not find it in the i...

You can use R to fit EVT and copulas relatively easily.I dont know about Excel. If you search under my name, I asked a question about the specification for gaussian and T copula

How is it going now?

insurers in the UK calculate 1 year VaR. Solvency 2 is also 1 year VaR.

<t>thanks for this. What if the purpose of the VaR calculation is calculation of capital which you are required by regulation to set aside today - is discounting the right approach?If the regulation states VaR is to be calculated IN 1 years time, I think discounting is possible. If it states OVER 1 ...

<t>thanks a lot for the quick reply; and good question, that is helpfulinsurance companies have to a do VaR on one year, which makes the discounting more of a question (though perhaps not a lot in currently low yield context)I have heard another definition of VaR as:{{surplus at t=1 in real world be...

<t>If I am doing a 99th percentile VaR over 1 month on my balance sheet for say equity risk does that mean:{surplus at t=0} - {surplus in 99th percentile at t=1} (possibly allowing for discounting from t=1 to t=0)Is that right - or does someone have another definition? What are views on discounting ...