BlackRock's Guide to Fixed-Income Risk Management

ISBN-13: 9781119884873 / Angielski / Twarda / 2023 / 640 str.

Bennett W. Golub;Blackrock Inc

Spis treści

Frequently Used AbbreviationsForewordPrefaceAcknowledgmentsSection I: An Approach to Fixed Income Investment Risk ManagementChapter 1: An Investment Risk Management ParadigmBennett W. Golub and Rick Flynn1.1 Introduction1.2 Elements of Risk Management1.3 BlackRock's Investment and Risk Management Approach1.4 Introduction to the BlackRock Investment Risk Management ParadigmNotesChapter 2: Parametric Approaches to Risk ManagementBennett W. Golub and Leo M. Tilman2.1 Introduction2.2 Measuring Interest Rate Exposure: Analytical Approaches2.2.1 Macaulay and Modified Duration and Convexity2.2.2 Option-Adjusted Framework: OAV, OAS, OAD, OAC2.2.3 Dynamic Nature of Local Risk Measures: Duration and Convexity Drift2.2.4 Interest Rate Scenario Analysis2.3 Measuring Interest Rate Exposure: Empirical Approaches2.3.1 Coupon Curve Duration2.3.2 Empirical (Implied) Duration2.4 Measuring Yield Curve Exposure2.4.1 Key Rate Durations2.5 Measuring and Managing Volatility Related Risks2.5.1 Volatility Duration2.5.2 Option Usage in Portfolio Management2.6 Measuring Credit Risk2.6.1 Spread Duration2.6.2 Duration Times Spread (DxS)2.7 Measuring Mortgage-Related Risks2.7.1 Prepayment Duration2.7.2 Mortgage/Treasury Basis Duration2.8 Measuring Impact of TimeNotesChapter 3: Modeling Yield Curve DynamicsBennett W. Golub and Leo M. Tilman3.1 Probability Distributions of Systematic Risk Factors3.2 Principal Component Analysis: Theory and Applications3.2.1. Introduction3.2.2 Principal Components Analysis3.2.3 The First Principal Component and the Term Structure of Volatility3.2.4 Example: Historical Steepeners and Flatteners of the U.S. Treasury Curve3.3 Probability Distributions of Interest Rate ShocksNotesChapter 4: Portfolio Risk: Estimation and DecompositionAmandeep Dhaliwal and Tom Booker4.1 Introduction4.2 Portfolio Volatility and Factor Structure4.3 Covariance Matrix Estimation4.3.1 Weighting of Historical Data4.3.1.1 Exponential Decay Weighting4.3.1.2 Alternative Weighting Schemes and Stress Scenarios4.3.1.3 Enhancing Volatility Responsiveness Dynamically4.3.2. Asynchronicity4.3.2.1 Overlapping Covariance Matrix4.3.2.2 Newey-West Estimation4.3.3. Factor Model Structure: Generalizations4.3.3.1. Optimization of the Error-Bias Tradeoff4.3.3.2. Misspecification and Omitted Covariation4.3.4 Covariance Matrix Estimation: Summary and Recommendations4.4 Ex-Ante Risk and Value-at-Risk (VaR) Methodologies4.4.1 VaR Estimation Approaches4.4.2. Enhanced HVaR4.4.2.1. EHVaR Systematic Risk Methodology4.4.2.2 EHVaR Idiosyncratic Risk Methodology4.4.3. VaR Estimation: Summary4.5 Introduction to Risk Decomposition4.6. Alternative Approaches to Risk Decomposition4.6.1 A Comparison of the Different Approaches4.7 Risk Decomposition Using CTR4.7.1 Security-level Contributions and Aggregations4.7.2 Factor-level Contributions and Aggregations4.7.3. Decomposing Contribution to Risk into Atomic Contributions4.7.4 Decomposing Contribution to Risk into Exposure, Volatility and Correlation4.7.5 Decomposing Contribution to Risk using ANOVA4.8. Risk Decomposition Through Time4.9. Risk Decomposition: SummaryAppendix A. EHVaR: Idiosyncratic Risk EstimationAppendix B. EHVaR: AggregationNotesChapter 5: Market-Driven Scenarios: An Approach for Plausible Scenario ConstructionBennett W. Golub, David Greenberg, and Ronald Ratcliffe5.1 Introduction5.2 Implied Stress Testing Framework5.2.1 Market-Driven Scenario Framework5.2.2 Scenario Likelihood5.2.3 From Likelihood to Probability5.2.4 Decomposing the Scenario Z-Score5.2.5 Specifying a Covariance Matrix5.3 Developing Useful Scenarios5.3.1 Scenario Definition5.4 A Market-Driven Scenario Example: Brexit5.4.1 Describing Different Brexit Scenario Outcomes5.4.2 Identifying Key Policy Shocks in Soft Brexit Scenario5.5 ConclusionAppendix: Decomposition of Scenario Z-ScoreNotesChapter 6: A Framework to Quantify and Price Geopolitical RisksCatherine Kress, Carl Patchen, Ronald Ratcliffe, Eric Van Nostrand, and Kemin Yang6.1 Introduction6.2 Setting the Scene6.2.1 Short and Sharp6.2.2 Shades of Gray6.3 BlackRock's Framework for Analyzing Geopolitical Risks6.4 Global Trade Deep Dive6.4.1 Calibrating the Shocks6.5 What is Already Priced in?6.5.1 Is It Priced In?6.5.2 Adjusted Impacts6.5.3 Assessing Likelihood6.5.4 Takeaways6.6 Taking Action6.6.1 Key Drivers6.6.2 BGRI-Specific Assets6.6.3 The Path Forward6.7 Caveats and CautionsNotesChapter 7: Liquidity Risk ManagementBennett W. Golub, Philip Sommer, Stefano Pasquali, Michael Huang, Kristen Walters, and Nikki Azznara7.1 Introduction7.2 A Brief History of Liquidity Risk Management7.3 A Fund Liquidity Risk Framework7.4 Asset Liquidity7.4.1 Importance of Data Modeling for Liquidity Risk Management7.4.2 Asset Liquidity: Days-to-Liquidate7.4.3 Asset Liquidity: Corporate Bond Transaction Costs (T-Cost)7.5 Redemption Risk7.5.1 Managing Redemptions and Outflow Risk7.6 Liquidity Stress Testing7.7 Extraordinary Measures7.8 Fixed Income Data Availability Limitations7.8.1 Modeling Asset Liquidity7.8.2 Modeling Redemption-at-Risk7.8.3 Modeling Liquidity Optimization7.9 ConclusionNotesChapter 8: Using Portfolio Optimization Techniques to Manage RiskAlex Ulitsky, Bennett W. Golub, Leo M. Tilman, and Jack Hattem8.1 Risk Measurement Versus Risk Management8.2 Typical Fixed Income Hedges8.3 Parametric Hedging Techniques8.4 Generalized Approach to Hedging8.4.1 Hedging as Constrained Portfolio Optimization8.4.2 Mathematical Formulation8.4.2.1 Exposure Hedging8.4.2.2 Managing a Portfolio to a Benchmark8.4.2.3 Stress Scenario Hedging8.4.3 Examples of Optimized Risk Management Strategies8.4.3.1 Achieving an ESG Tilt While Managing a Fixed-Income Portfolio Relative to a Benchmark8.4.3.2 Hedging Stress Scenario Exposure8.5 Advanced Portfolio Optimization and Risk Management Techniques8.5.1 Risk Budgeting/Parity8.5.2 Going Beyond a Single Fund / Single Period in Portfolio Risk Management8.5.2.1 Multi-Fund Portfolio Construction and Risk Management8.5.2.2 Multi-Period Portfolio Construction and Risk Management8.5.2.3 Risk Management Using Scenario Optimization8.5.3 Example: Risk Budgeting for Factor-Based InvestingNotesChapter 9: Risk GovernanceBennett W. Golub9.1 Introduction9.2 Risk Scan Standard Framework9.3 Risk and Performance Target (RPT) Framework9.4 GovernanceNotesChapter 10: Risk - Return Awareness & Behavioral FinanceEmily Haisley and Nicky Lai10.1 Introduction10.2 Portfolio and Risk Manager Partnership10.3 Behavioral Risk Management for Fixed Income10.4 Decision Making Analytics10.4.1 Loss Aversion10.4.1.1 The Disposition Bias10.4.1.2 The Endowment Effect10.5 Investment Process10.5.1. Leveraging the Wisdom of the Crowds10.5.2 Bolster System II Thinking10.5.3 Facilitate Continuous Learning10.6 ConclusionNotesChapter 11: Performance AttributionReade Ryan and Carol Yu11. 1 Introduction11.2 Brinson Attribution and Beyond11.2.1 Comparing Market Value Brinson Attribution to Beta-Adjusted Attribution11.3 Factor-Based Attribution11.4 Equity Fundamental Factor-Based AttributionNotesChapter 12: Performance AnalysisMark Paltrowitz, Mark Temple-Jones, Viola Dunne, and Christopher Calingo12.1 Introduction12.2 Performance Governance12.3 Performance Metrics12.3.1 Active Performance Measurement12.3.1.1 Alpha Target Ratio12.3.1.2 Weighted Peer Percentile12.3.1.3 Strength and Weaknesses of the ATR and Weighted Peer Percentile12.3.1.4 Alpha Dollars12.3.1.4.1 Strength and Weaknesses of Alpha Dollars12.3.2 Index Performance Metrics12.3.2.1 Direct Tracking Basis Points (BP)12.3.2.2 Strength and Weaknesses of Direct Tracking BP12.4 ConclusionNotesChapter 13: Evolving the Risk Management ParadigmBennett W. Golub, Michael Huang, and Joe Buehlmeyer13.1 Introduction13.2 Traditional Buy-side Risk Management Framework13.3 Evolving the IRMP: In Pursuit of Investment Risk Management at Scale13.4 Risk Governance13.5 Supporting Risk Governance Through Technology13.6 Implementing a Risk Governance Framework through Aladdin13.7 Aladdin Risk Radar Example13.7.1 Aladdin Risk Radar Overview13.7.2 Rules & Portfolio Subscriptions13.7.3 Exceptions and Tasks13.7.4 Exception Classification13.7.5 Risk Exception Reporting and Audit13.7.6 What is Next for Technology-Enabled Investment Risk Oversight?13.8 ConclusionNotesSection II: Fixed Income Risk Management - Then and NowChapter 14: The Modernization of the Bond MarketDaniel Veiner, Stephen Laipply, Carolyn Weinberg, Samara Cohen, Vasiliki Pachatouridi, and Hui Sien Koay14.1 Charting the Evolution of Bond Markets14.1.1 The Current State of Bond Market Liquidity14.1.2 The Modernization of Bond Market Structure14.1.3 Continued Growth in Electronic Bond Trading14.2 The Development of an Index-Based Ecosystem14.2.1 Fixed Income ETFs: Continued Strong Growth and Adoption14.2.2 Portfolio Trading and Fixed Income ETFs14.2.3 Continued Growth in Bond Index Derivatives Markets14.2.4 Fixed Income ETF Options14.3 Implications for Investing, Portfolio Management and Risk Management14.3.1 Use Cases for Fixed-Income ETFs and Other Index Exposures14.4 The Future State of Portfolio Construction14.4.1 Portfolio Engineering and Construction14.5 ConclusionNotesChapter 15: The LIBOR TransitionJack Hattem15.1 Introduction15.2 Implications to Portfolio and Risk Management15.3 Shift from LIBOR to SOFR15.4 Risk Management Impact and Coordination15.5 Reflections on a Benchmark ReformedNotesChapter 16: Derivatives Reform: The Rise of SEFs and Central CounterpartiesEileen Kiely and Jack Hattem16.1 The Call for Change: 2008 Global Financial Crisis16.1.1 SEFs16.1.2 CCPs16.2 The Value of Derivatives in Fixed Income Portfolios16.3 Trading Fixed-Income Derivatives: The Rise of SEFs16.4 Clearing Fixed-Income Derivatives: The Rise of CCPs16.5 CCP Risk Mitigation Techniques16.5.1 CCP Risk Mitigation Techniques: What Could Go Wrong?16.6 The Call for Change: Market Participants Ask for Stronger CCPs16.7 ConclusionNotesSection III: Lessons Learned from the Financial Crisis and Coronavirus PandemicChapter 17: Risk Management Lessons Worth Remembering from the Credit Crisis of 2007-2009Bennett W. Golub and Conan Crum17.1 Introduction17.2 The Paramount Importance of Liquidity17.2.1 Price <> Intrinsic Value Unless Special Conditions Hold17.2.2 Cash and Cash Flow are the Only Robust Sources of Liquidity17.2.3 Complexity and Opacity Matter More Than You Think17.2.4 Collateralization Can Be a Two-Edged Sword17.2.5 Liquidity Is a Common Risk Factor17.3 Investors in Securitized Products Need to Look Past the Data to the Underlying Behavior of the Assets17.4 Certification is Useless During Systemic Events17.5 Market Risk Can Change Dramatically17.6 The Changing Nature of Market Risk17.7 By the Time a Crisis Strikes, it's too Late to Start Preparing17.8 ConclusionNotesChapter 18: Reflections on Buy-Side Risk Management After (or Between) the StormsBennett W. Golub and Conan Crum18.1 Introduction18.2 Risk Management Requires Institutional Buy-In18.3 The Alignment and Management of Institutional Interests18.4 Getting Risk Takers to Think Like Risk Managers18.5 Independent Risk Management Organizations18.6 Clearly Define Fiduciary Obligations18.7 Bottom-Up Risk Management18.8 Risk Models Require Constant Vigilance18.9 Risk Management Does Not Mean Risk AvoidanceNotesChapter 19: Lessons Worth Considering from the COVID-19 CrisisBarbara Novick, Joanna Cound, Kate Fulton, and Winnie Pun19.1 Introduction19.2 Background19.3 Core Principles Underpinning Recommendations19.4 March 2020: Capital Markets Highlights and Official Sector Intervention19.5 COVID-19 Lessons: What Worked and What Needs to be Addressed19.6 Recommendations to Enhance the Resilience of Capital Markets19.6.1 Recommendations Regarding Bank Regulations19.6.2 Recommendations Regarding Market Structure19.6.2.1 Treasuries19.6.2.2 Short-Term Markets19.6.2.3 Fixed-Income Markets19.6.2.4 Central Clearing Counterparties (CCPs)19.6.2.5 Equities19.6.2.6 Indices19.6.2.7 Data19.6.3 Recommendations Regarding Asset Management19.7 Concerns with Macroprudential Controls19.8 Conclusion19.9 PostScriptNotesBibliographyAbout the WebsiteAbout the EditorAbout the ContributorsIndex

O autorze

Bennett W. Golub is one of the original founders of BlackRock. During his 34-year career at BlackRock, Dr. Golub was a member of BlackRock's Global Executive Committee, co-head of its Risk & Quantitative Analysis group and served as BlackRock's Chief Risk Officer from 2009--2022. Additionally, he co-founded BlackRock Solutions. Currently, Dr. Golub serves as a Senior Advisor to BlackRock.