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The portfolio management, derivatives management, and risk management leaders have determined that the models need to be more relevant for 'new normals'. That is, they
The portfolio management, derivatives management, and risk management leaders have determined that the models need to be more relevant for 'new normals'. That is, they want the desk to test for, and model, regime switching time series models. Your group will be responsible for illustrating a particular case in detail. The data will start in pre-COVID times in 2019, run through the pandemic, and come up through the third quarter of 2022 (end of September 2022). The group's work will serve as a rich example for both the asset management and risk management teams. Tasks Step 1 Each team member works individually collecting 1 financial time series. All the time series should be from 2 or more different asset classes (e.g. equities, rates, credits, cryptocurrencies). All the time series should span the years 2019 - 2022. Note that series need not be prices, but can include returns, volatilities, default probabilities, yields, etc. Step 2 In groups: a. All team members collaborate to produce visualizations of the series. In particular, the graphs show any regime changes in the series. Since the data bookends the COVID pandemic, there are likely going to be several regimes in the series. Students will identify the
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