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Post by Sapphire Capital on Jul 11, 2008 7:17:19 GMT 4
On Measuring Risk with Scarce Observations ALEXANDER S. CHERNY Moscow State University RAPHAEL DOUADY Affiliation Unknown STANISLAV A. MOLCHANOV University of North Carolina at Charlotte -------------------------------------------------------------------------------- March 27, 2008 Abstract: We consider the problem of measuring the risk of a portfolio with scarce observations by linking it to several risk factors. A typical example is measuring the risk of a hedge fund. It is assumed that from the available data one can estimate the joint law of all the factors as well as all the 2-dimensional joint laws of the portfolio's return and increments of each factor. The problem is to recover the conditional mean of the portfolio's return given the values for all factors. We present an analytic computationally feasible solution of this problem for the case when the joint law of factors is a Gaussian copula. papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1113730_code629747.pdf?abstractid=1113730&mirid=1
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