Slow adaptors want to be sure the change is permanent and necessary before they are willing to adapt to it. They do not believe in change for change’s sake. Slow adaptors often need specific details about the change event to determine how the change will directly impact them and their day-to-day routines. Slow adaptors require [...]
Our investigation demonstrates that all of the examined bond indices exhibit negative skewness and excess kurtosis, both of which increase the probability of extreme negative returns. For all asset classes except for the most liquid sector, government bonds, significant autocorrelation is identified in monthly index returns. Therefore, sample estimators of standard deviation, skewness and kurtosis [...]
In determining if quantitative approaches may add value, and which model is best suited, both investment horizon and performance targets as well as credit-specific characteristics should be considered. We would distinguish those investors who are concerned with mark-to-market fluctuations from those who are focused on absolute return to maturity. The latter may find the long-term [...]
The third and last type of quantitative credit models that we want to mention briefly are factor models. In contrast to both the structural and reduced-form models, the factor model does not attempt to model default. Rather, linear regression is used to assess the relative richness or cheapness of individual credits. The factor model attributes [...]