Simulating Security Returns : A Filtered Historical Simulation Approach

Simulating Security Returns uses the FHS approach to help simulate the returns of large portfolios of securities. Practitioners in risk management are familiar with the use of the FHS (filtered historical simulation) to finding realistic simulations of security returns. This approach has become increasingly popular over the last fifteen years, as it is both flexible and reliable, and is now being accepted in the academic community. Simulating Security Returns is a useful guide for researchers, students, and practitioners. It uses the FHS approach to help simulate the returns of large portfolios of securities. While other simulation methods use the covariance matrix of security returns, which suffers the curse of dimensionality even for modest portfolios, Barone Adesi demonstrates how FHS can accurately adjust to current market conditions Cover 1 Half-Title 2 Title 4 Copyright 5 Contents 6 List of Figures 7 List of Tables 9 Acknowledgments 11 List of Contributors 12 1 Introduction: Simulating Security Returns 14 2 VaR without Correlations for Portfolios of Derivative Securities 22 3 Backtesting Derivative Portfolios with FHS 43 4 A GARCH Option Pricing Model with Filtered Historical Simulation 79 Index 122 Front Matter....Pages i-xii Introduction: Simulating Security Returns....Pages 1-8 VaR without Correlations for Portfolios of Derivative Securities....Pages 9-29 Backtesting Derivative Portfolios with FHS....Pages 30-65 A GARCH Option Pricing Model with Filtered Historical Simulation....Pages 66-108 Back Matter....Pages 109-111