Advancing the Field of Quantitative Finance
formerly the IAFE

Event: The StressVaR: A New Risk Concept for Superior Fund Allocation
Date: March 3, 2010
Time: 5:00 Registration and Coffee Reception
5:30 - Event
Location:
PricewaterhouseCoopers

300 Madison Avenue
New York

International Association of Financial Engineers presents

An IAFE Members Only Tutorial

The StressVaR: A New Risk Concept for
Superior Fund Allocation

March 3, 2010
5:00 Registration and Coffee Reception
5:30-6:30 Event

PricewaterhouseCoopers

300 Madison Avenue

New York

Presented by

Raphael Douady

Research Director, Riskdata

The StressVaR: a New Risk Concept for Superior Fund Allocation
Cyril Coste, Raphaël Douady, Ilija I. Zovko

In this paper we introduce a novel approach to risk estimation based on nonlinear factor models - the "StressVaR" (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. The computation of the StressVaR is a 3 step procedure whose main components we describe in relative detail. Its principle is to use the fairly short and sparse history of the hedge fund returns to identify relevant risk factors among a very broad set of possible risk sources. This risk profile is obtained by calibrating a collection of nonlinear single-factor models as opposed to a single multi-factor model. We then use the risk profile and the very long and rich history of the factors to asses the possible impact of known past crises on the funds, unveiling their hidden risks and so called "black swans".

 

This event is only open to IAFE Practitioner and Academic level members.  No Student member registrations will be accepted.