Correlations are an essential component of a risk management and investment decision framework. They determine how risk aggregates across different asset classes and liabilities into portfolio or balance sheet risk.
Unfortunately, correlations are very complex because they have many dimensions. Calibrating risk models to realistic correlation structures can be difficult and time-consuming, especially as the dimensions of the models increase. Practitioners are then often forced to follow a “partial approach” in which they calibrate models on an application-specific subset of the correlation dimensions.
Although understandable, such a partial approach to correlation modeling is inefficient and inconsistent. In this paper we discuss the various dimensions of correlations and illustrate how these can be mastered with the help of well-designed and calibrated risk models.
This blog post explores three approaches to measuring the impact of liabilities on SAA: actuarial simulation, replicating portfolio, and product-based dynamic liability modelling. It also compares the advantages and disadvantages of each approach in terms of accuracy and runtime efficiency, highlighting the benefits of a dynamic liability modelling approach as a fast, flexible, and efficient solution for multi-scenario SAA analyses in a full ALM context.
Conquest Planning chooses Ortec Finance to enhance its market leading financial planning platform
By providing Conquest with stochastic modelling for its volatility analysis module Ortec Finance reaffirms is position as a leading global provider of technology and solutions for risk and return management.
Reflections on COP27 – Progress on loss and damage in exchange for ongoing public policy failure to deliver on climate action?
Bert Kramer, Head of Research and Rosanne Lam, Strategy Manager attended COP27 in Sharm El Sheikh this year and observed the collective shift in tone from ambitious target-setting towards an attempt to tangibly implement climate compensation amongst our world leaders and industries.
Portfolio and Goal Monitoring: The Next Level in Goal-Based Planning
For individual investors and their advisors, this technology can help elevate the advice and management of client goals and enhance the operational efficiency of advisor practices, ultimately helping build better client outcomes.