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Measuring and managing market, credit and Op risk [110]

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Bullet points include: Suppose we have N instruments and estimate the covariance matrix from T observations per instrument where T much less than N (e.g. as would normally be the case for a whole market model) Then at most T-1 non-zero eigenvectors Most of the smaller ones may be random Places fundamental limits on reliability of factor analysis (or other risk modelling derived from historic return series), see e.g. Kemp (2011)

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