Advances in Risk Management

350

Table 17.7

Continued

Panel C: sensitivity of volatility, covariance and risk premium of the British indices to unitary shocks (1%)

FTSE shock

SMALL CAP shock

Common shock

+−+ −

FTSE(

+

)

FTSE(

−

)

FTSE(

+

)

FTSE(

−

)

SMALL CAP(

+

)

SMALL CAP(

−

)

SMALL CAP(

−

)

SMALL CAP(

+

)

FTSEVolatility

2.9695

3.0963

1.6182

5.0617

1.3514

5.8317

6.6371

4.6710

Risk premium

0.2425

0.2636

0.0720

0.7046

0.0502

0.9352

1.2070

0.5978

SMALL CAPVolatility

1.1891

3.0920

3.1174

3.2526

1.9282

4.2454

4.4058

5.1668

Covariance

0.0336

0.0551

0.0480

0.0859

−

0.0281

0.1755

0.2421

0.2226

Risk premium

0.0923

0.1516

0.1319

0.2362

−

0.0772

0.4827

0.6633

0.6100

Notes

: The table shows the incremental effect produced in volatility and covariances by a unitary shock (1%) in the large and/or small index returns. All increases are

annualized and in percentage terms. The headline of each column shows the sign of the shock.