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|Title:||Boundaries of Correlation Adjustment with Applications to Financial Risk Management|
Financial Product Development
South Carolina Commission on Higher Education
|Keywords:||Economics, Econometrics and Finance;Mathematics|
|Citation:||Applied Mathematical Finance. Vol.20, No.4 (2013), 403-414|
|Abstract:||In recent years, stress testing has become a regulatory requirement for risk assessment in financial institutions. To perform stress testing in multi-asset case, adjusting the correlation matrix to an extreme level is an important process. With a larger matrix, it is more difficult to choose the right correlation coefficients such that the newly adjusted correlation matrix is still valid. In this article, we present a systematic way to obtain the boundaries of a correlation matrix for both single stress and multiple stress cases, which can help determine how much the correlation should be adjusted in the first place. © 2013 Copyright Taylor and Francis Group, LLC.|
|Appears in Collections:||Scopus 2011-2015|
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