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What work has been done on the effect of time on systematic risk and unsystematic risk on portfolios?? Has anyone got any references?
Is it just that one or both types of risk reduce over time?
Who knows? |
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dadeto
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| NP Priestess |
| Total Posts: 562 |
| Joined: Sep 2004 |
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The foolish,
didn't they teach you that you shouldn't have unsystematic risk in your portfolio, to start with? so what are you talking about???? 
I know nothing about your question, but would say that time is only a parameter of the measure (i.e. what time frame you take to assess your risk). I wouldn't say it has a functional influence on your risk. I'm probably missing something, but to me your question looks like "what is the influence of time in measuring correlation and a ratio of volatilties?".
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"Stay rude. Stay rebel." FDAXHunter |
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I am studying basket options.
My model for basket options models correlation skew, it has underlying assets which are constant in vol and hence implied vol across the strikes. Hence, due to the correlation skew, the basket hass a skewed implied vol across the strikes.
(i)The properties of the model are, as the number of assets are increased, then the skew increases and the vol of the basket drops. (Good)
(ii)The magnitude of the skew increases for decreasing option maturities. (Good also!)
I am trying to explain part(ii) in terms of risk and how holding onto baskets of equity reduces the risk as the length of time you hold them increases.
(I think thats right)
I used systematic and unsystematic risk for part(i), but was looking for motivation (or research) that I could use to explain part(ii) with more conviction.
Cheers
FF |
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dadeto
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| NP Priestess |
| Total Posts: 562 |
| Joined: Sep 2004 |
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| are you phuking around with some dispersion modelling? |
"Stay rude. Stay rebel." FDAXHunter |
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Sort Of.
It has to be finished by next week.
It is a deterministic correlation model, sort of a simple local correlation model. Has some nice properties and is for my MSc, so doesn't have to be too complex |
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dadeto
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| NP Priestess |
| Total Posts: 562 |
| Joined: Sep 2004 |
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| (ii) is a property that is not specific to baskets. I don't see how you're going to link CAPM with stochastic volatility... May be some other guys here have more ideas than me... |
"Stay rude. Stay rebel." FDAXHunter |
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ds_meer
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| Total Posts: 3 |
| Joined: May 2023 |
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| I have never personally encountered it before |
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