Diversified VaR describes the correlation benefit which accrues from holding a diversified set of assets. If you set your entire correlation matrix to one's you will obtain your undiversified VaR.

You might find the approach of Leon and Reveiz of interest see here and here

<t>Interesting thread. Have been mulling this one over with a view to timing commodities re-entry. Some counters trading at below 20cents to the dollar after near -40% fall in 2015. During the previous commodity 'super cycle' which ended in '89 prices took 10 years to reach the bottom. If one measur...

<t>I think this may be what you are looking for. It is also possible to generate an analogue to the Pearson Product Moment Correlation matrix for the four moment case using those co-skewness and co-kurtosis tensor matrices however it does not scale very well obviously. See Four Moment Decomposition ...

There is also the method proposed by Wingender in The Analytics of the Intervaling Effect on Skewness and Kurtosis of Stock Returns outlined here Lessons from the Credit crisis the importance of Liquidity with spreadsheet implementation here.

The convention is to annualise so you can show your nice results to other people when looking to raise capital - but as long as all the simulations are for the same time period it is still an apples and apples comparison.

If e is an eigenvector of A with eigenvalue v thenA e = v ebut alsoA (-e) = v (-e)therefore the sign is arbitrary

<t>Hi RolandograndiI have done some work on this and there are a couple of issues / problems. Firstly in principle one might want to maximise your portfolio's upside beta, minimise your downside beta and have close to a zero correlation to some benchmark. The main problem here is that because of the...

Wonderful world of banking

Old Johannesburg Stock Exchange trading floor where I grew up. Sadly all screen trading now.

Back of an envelope calc assuming a $5tn a day market and 2bp over/under gets you to $200bn pretty easily but that number too scary for all probably including the regulators. Can't have been going on on every trade either.

"This feels like a $20bn-$30bn dollar issue," said Christopher Wheeler, analyst at Mediobanca FT Article

<t>More than 25 FX Dealers including Heads of Dept, 'resigned', suspended or fired in past two months. No one has yet been charged with any wrongdoing, but last year's international investigation into Libor manipulation saw 10 financial firms fined $6 billion and 13 individuals charged. Martin Wheat...

<t>I have had some success using the ratio of the Cornish Fisher Modified downside probability to the normal probability of loss as a deviation from normality indicator. It is my belief that tail deviations don't all happen instantaneously and that you often get sufficient precursor movement, probab...

<t>One of the issues that has been exercising my mind with regard to the markets current love affair with risk parity is the degree to which there may already be be crowding into the same risk factor trades due to all of the necessary dimensional reduction via PCA etc. This may have the effect of in...