Page - 50 uses square root of variance first order correlation parameters and page 26 does not. Can anybody tell the difference of these series?
On an another note, pension funds page 261 last sentence of first paragraph, schweser states in AL risk management that “an asset that has high volatility, but is NEGATIVELY correlated with plan liabilities may be viewed as having lower risk” Isn’t it positively correlated?
‘Page - 50 uses square root of variance first order correlation parameters and page 26 does not. Can anybody tell the difference of these series?’
You are referring to Book 2 of Schwarer, Pay little closer attendtion to the terms, on page 26, it is talking about total risk (Variance). If you take the square root of the equation on page 26, you get the equation on page 50, which it is using standard deviation. Wish they would specify better.
"On an another note, pension funds page 261 last sentence of first paragraph, schweser states in AL risk management that “an asset that has high volatility, but is NEGATIVELY correlated with plan liabilities may be viewed as having lower risk” Isn’t it positively correlated? "
This in context of asset-liability (plan). you want plan asset to have negative correlation with plan liability. Think about this, you want asset to go up and liability to go down (so your plan surplus can improve).