Advances in Risk Management

INDEX 371

Majnoni, G. 48
Malkiel, B.G. 108, 111
Mallows, C.L. 148
Mandal, K. 103
Manganelli, S. 48, 54, 57, 66, 67
Mann, C. 108
manufacturing 57, 63, 64, 65
market frictions 33, 35–7
market indices 331–51
market risk 69, 83
market value 167–8
marking to market 206–7
marking to model 206–7
Markowitz, H. 194, 241, 243, 265
Martens, M. 305
Martin, J.S. 108
Masulis, R.W. 305
maximum likelihood estimation (MLE)
techniques 3–4
MC1 control charts 248, 252, 254–8
McNeal, A.J. 48
mean absolute error 234–5, 236
mean excess function (MEF) plot 7–8,
12, 14
mean square error (MSE) 12, 15
mean-variance optimization models
265–6, 276
Meckling, W.H. 283
Meier, I. 281
Mele, A. 87, 90–1
Meneu, V. 311, 317
Merrill Lynch 208
Merton, R.C. 23, 109, 110, 124, 192, 194
credit pricing model and stochastic
volatility 112–14, 127–8
Merton-style credit risk models
132–6, 142–3, 150
Michaud, R.O. 265–6
MIDCAC index 331–51
Miller, M.H. 280
Mills, T.C. 88
minimal equivalent martingale
measure 113–14, 126
misspecification indicators 344–5
model-building process 199–201
model calibration 200
model selection/creation 199–200
model usage 200–1
model error 164
model-implied calibration 354–5
model misspecification 359, 360–1
model risk 191–212, 355
case study 201–3
examples and consequences 193

illustration 195–7

model-building process and model

risk creation 199–201

rules for managing 203–10;

correlations 210; define a

model-testing framework 205–6;

define what should be a good

model 204; exotic derivatives

209–10; keeping track of models in

use 204–5; marking to market

206–7; regular revision of models

206; simplicity 207–8; stress

testing of models 209; use a

model for its purpose 209;

verification of data 208

model selection 199–200

and its impact on hedging

derivatives 353–64

model-testing framework 205–6

model usage 200–1, 204

model validation team 205

Modigliani–Miller (MM) paradigm

281, 282

monotonicity 28

Monte Carlo simulation 87

comparison of multivariate and

simultaneous control charts

253–5

forecasting interest rate term

structure 98–102; Bollinger bands

99; empirical results 99–102, 103

Moreno, M. 70, 74

Mossin, J. 278

motivation, economic 29–30

Moudoulaud, O. 8, 9

Moustakides, G.V. 249

moving average specification 266

Muirhead, R.J. 259

multifactor models

intensity-based 143–6

interest rate term structure 93

multiple VaR levels 216–17

multivariate CUSUM (MCUSUM)

control charts 249, 252, 254–8

multivariate EWMA (MEWMA) control

charts 250–1, 254–8, 259

multivariate GARCH models

time-varying return correlations and

the efficient set of portfolios

265–77

volatility spillovers in Europe 330–1

volatility transmission between USA

and Spain 303–26