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Market Risk [11]

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Bullet points include: What if portfolio is changing and there are incomplete data histories for components (e.g. new issues) (and/or more recent past deemed more relevant than longer ago)? Or instruments change characteristics – e.g. company changes sector? Or involves non-linear, i.e. option or option-like exposures? What if innovations not i.i.d.? Heteroscedasticity and GARCH. What if innovations (i.e., here, daily returns) not normally distributed? Do our risk estimators appropriately handle idiosyncratic risk? Potentially very important for portfolio optimisers

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