paul wilmott on quantitative finance crashmetrics

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1、CHAPTER43CrashMetricsInthisChapter...•themethodologyofCrashMetricsformeasuringaportfolio’sexposuretosudden,unhedgeablemarketmovements•PlatinumHedging•crashcoefficients•marginhedging•counterpartyrisk•theCrashMetricsIndexformeasuringthemagnitudeofcrashes43.1INTRODUCTIONThefinalpieceofthejigsaw

2、forestimatingriskinaportfolioisCrashMetrics.IfValueatRiskisaboutnormalmarketconditionsthenCrashMetricsistheoppositesideofthecoin;itisabout‘firesale’conditionsandthefar-from-orderlyliquidationofassetsinfar-from-normalconditions.CrashMetricsisadatasetandmethodologyforestimatingtheexposureofap

3、ortfoliotoextrememarketmovementsorcrashes.Itassumesthatthecrashisunhedgeableandthenfindstheworstoutcomeforthevalueoftheportfolio.Themethodthenshowshowtomitigatetheeffectsofthecrashbythepurchaseorsalesofderivativesinanoptimalfashion,so-calledPlatinumHedging.Derivativeshavesometimesbeenthough

4、tofasbeingadangerouscomponentinaportfolio,butintheCrashMetricsmethodologytheyareputtoabenignuse.43.2WHYDOBANKSGOBROKE?Therearetwomainreasonswhybanksgetintoserioustrouble.Thefirstreasonisthelackofsuitableorsufficientcontroloverthetraders.Throughmisfortune,negligenceordishonesty,largeandunmana

5、geablepositionscanbeenteredinto.Theconsequencesareeitherthatthetraderconcernedbecomesaheroandthebankmakesafortune,orthebanklosesafortune,thetradermakesarunforitandthebankgoesunder.Theoddsarefifty-fifty.Thesecondcausesofdisasteraretheextreme,unexpectedandunhedgeablemovesinthestockmarket;thecr

6、ashes.710PartFourcreditrisk43.3MARKETCRASHESIntypicalmarketconditionsone’sportfoliowillfluctuaterapidly,butnotdramatically.Thatis,itwillriseandfall,minutebyminute,daybyday,butwillnotcollapse.Therearetimes,sayonceayearonaverage,whenthatfluctuationisdramatic...andusuallyinthedownwarddirection.

7、Theseareextrememarketmovementsormarketcrashes.VaRcantellusnothingabouttheseandtheymustbeanalyzedseparately.What’sspecialaboutacrash?Twothingsspringtomind.Obviouslyacrashisasuddenfallinmarketprices,toorapidfortheliquidationofaportfolio.Butacrashisn’tjustarisein