Summer

IEORE4721 Correlation Risk Modeling and Management


Instructor: Gunter Meissner

Additional Information: IEOR_E4721_Summer_2016_Syllabus.pdf

Topics to be covered:

1: Motivation: Correlations are ubiquitous is finance
-          Correlation and Investments
-          Correlation and Trading
-          Correlation and Risk Management
-          Correlation and the Global Finance Crisis
-          Correlation and Basel III

2: The big picture: An overview of 15 Correlation Models; Is there a ‘Best Correlation      Model’? Will there be a ‘Black-Scholes-Merton’ correlation model, which will dominate correlation modeling?

3:  Empirical Properties of Correlations

4: The Pearson Correlation Model – Work of the Devil?

5: Correlation vs Cointegration – Is Cointegration superior?

6: The Gaussian Copula – Rightfully blamed for the Global Financial Crisis?

7: The OFGC – One-factor Gaussian Copula model “Stupid and Dangerous”? (Paul Willmot)   (applied by Basel II and III)

8: Quantifying Market Correlation risk and Credit Correlation risk: Vanna, Cora and Gora

9: Stochastic Correlation Models

10: Correlation Trading Strategies – Benefits and Limitations

11: Basel’s Correlation Approach – Too simplistic?




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