Central Bank of Colombia paper evaluates CrashMetrics risk estimation
A paper published by the Central Bank of Colombia on May 23 analyses the effectiveness of the risk estimation methodology "CrashMetrics".
The authors, Esteban Gómez, Juan Carlos Mendoza and Nancy Zamudio, use measures of crash duration and crash convexity to calculate the worst possible scenarios for a sample of portfolios during debt market turmoil in 2006. The paper states that, during a crisis, CrashMetrics provides better estimates of risk than traditional stress tests.
The researchers
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