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Journal articles (2006), Journal of Banking and Finance, pp. 2387

A New Measure of Cross-sectional Risk and its Empirical Implications for Portfolio Risk Management

Gallucio S., RONCORONI Andrea

We introduce a new risk measure quantifying the link between cross-sectional shape and market risk. We compare our risk measure to the traditional cross-yield covariance according to their relative performance. Empirical investigation in the US interest rate market shows that 1) cross-shape risk factors outperform cross-yield risk factors (i.e., yield curve level, slope, and convexity) in explaining the market risk of yield curve dynamics, 2) hedging multiple liabilities against cross-shape risk delivers superior trading strategies compared to those stemming from cross-yield risk management.

GALLUCIO, S. and RONCORONI, A. (2006). A New Measure of Cross-sectional Risk and its Empirical Implications for Portfolio Risk Management. Journal of Banking and Finance, pp. 2387.

Keywords : #Analyse-factorielle, #Gestion-des-risques, #Risk-Management, #Risk-Measures, #Taux-d'intérêt