Boundaries of Correlation Adjustment with Applications to Financial Risk Management

Boundaries of Correlation Adjustment with Applications to Financial Risk Management

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 rig...

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Main Authors: Kawee Numpacharoen, Kornkanok Bunwong
Other Authors: Financial Product Development
Format: Article
Published: 2018
Subjects:
Economics, Econometrics and Finance
Mathematics
Online Access:https://repository.li.mahidol.ac.th/handle/123456789/31700
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Institution: Mahidol University
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spelling th-mahidol.317002018-10-19T12:09:19Z Boundaries of Correlation Adjustment with Applications to Financial Risk Management Kawee Numpacharoen Kornkanok Bunwong Financial Product Development Mahidol University South Carolina Commission on Higher Education Economics, Econometrics and Finance Mathematics 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. 2018-10-19T04:53:51Z 2018-10-19T04:53:51Z 2013-09-01 Article Applied Mathematical Finance. Vol.20, No.4 (2013), 403-414 10.1080/1350486X.2012.723517 14664313 1350486X 2-s2.0-84880017639 https://repository.li.mahidol.ac.th/handle/123456789/31700 Mahidol University SCOPUS https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=84880017639&origin=inward
institution Mahidol University
building Mahidol University Library
continent Asia
country Thailand
Thailand
content_provider Mahidol University Library
collection Mahidol University Institutional Repository
topic Economics, Econometrics and Finance
Mathematics
spellingShingle Economics, Econometrics and Finance
Mathematics
Kawee Numpacharoen
Kornkanok Bunwong
Boundaries of Correlation Adjustment with Applications to Financial Risk Management
description 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.
author2 Financial Product Development
author_facet Financial Product Development
Kawee Numpacharoen
Kornkanok Bunwong
format Article
author Kawee Numpacharoen
Kornkanok Bunwong
author_sort Kawee Numpacharoen
title Boundaries of Correlation Adjustment with Applications to Financial Risk Management
title_short Boundaries of Correlation Adjustment with Applications to Financial Risk Management
title_full Boundaries of Correlation Adjustment with Applications to Financial Risk Management
title_fullStr Boundaries of Correlation Adjustment with Applications to Financial Risk Management
title_full_unstemmed Boundaries of Correlation Adjustment with Applications to Financial Risk Management
title_sort boundaries of correlation adjustment with applications to financial risk management
publishDate 2018
url https://repository.li.mahidol.ac.th/handle/123456789/31700
_version_ 1763495542554361856

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