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Title
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Unraveling historic correlation
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Author
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Abstract
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| Correlations play an important role in many areas of finance. Unlike other financial variables correlation
can hardly be implied from market prices. Most applications hence extract correlation estimates
from historical data. This note illustrates how recent market events have impacted such estimates. The
calculations and results are simple but point out some crucial features. First, correlations have considerably
increased in recent markets and are likely to increase even further. And second, recent events
seem to undermine the distributional assumptions underlying models used to price and assess the risk
of financial assets. |
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Language
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English
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Source (journal)
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Bank- en financiewezen. - Bruxelles, 2003, currens
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Publication
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Bruxelles
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2009
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ISSN
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2033-7825
[print]
2566-154X
[online]
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Volume/pages
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5
(2009)
, p. 336-338
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