Interest Rates and Volatility – How Low Can They Go?
Riskdata delivers findings on Sovereign Debt and Fixed-Income Risk Modeling
Paris (PRWEB UK) 18 April 2013
Riskdata, a premier provider of risk management solutions to the investment industry, published a study that concludes that, when interest rates are low, the IR Volatility behaves as if the absolute minimum level for the rate were not zero, but -1%. Riskdata research team, led by Dr. Raphael Douady, performed back tests, covering 40 years of bond data encompassing both periods of low rates and those of high inflation. They examined the standard fixed-income risk model which is based on the assumption that bond risk is directly proportional to the interest rate, i.e. that the interest-rate distribution is "log-normal." The study demonstrated that this approach still applies; however, when interest rates are low, the bond risk becomes proportional to the rate, increased by 1%.
Dr. Douady commented, “In the context where industry experts are talking about a sovereign-debt bubble, we thought it was important to challenge our risk models. I believe our findings will be useful not only to our clients, but to all risk managers concerned by sovereign debt.”
Headquartered in Paris, with regional offices in New York, London and Moscow, Riskdata services over one-hundred top financial and investment institutions worldwide. Riskdata offers a comprehensive suite of Solutions for Asset Managers and Institutional Investors, covering all risk-management related needs, including quantitative asset screening, pre-trade simulation, portfolio construction, as well as regulatory compliance and reporting. Riskdata products combine global cross-asset-class pre-calculated data, with light and easy-to-integrate software. All Riskdata models fully meet the most challenging regulatory standards.
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For the original version on PRWeb visit: http://www.prweb.com/releases/prweb2013/4/prweb10638174.htmView Comments and Join the Discussion!