1. The document contains technical analyses and models created by the author to evaluate Nigerian stock and money markets, including: an equities volatility model, sector trend analysis, portfolio strategy backtesting, fundamental factor regressions, and performance attribution.
2. Credit risk models are presented to appraise money market counterparties and debt instruments, including default probability models and expected loss projections.
3. Additional analyses include option-adjusted bond spreads, counterparty credit allocation based on risk scores, and modeling of market default risk conditions.
4. I created an auto-updating model using historical NSEASi index levels to express volatility
in the equities market to support portfolio asset allocation decisions. For forecast EWMA
levels I use the GARCH (1,1) Model with simplistic assumptions that future index volatility
is strongly correlated with implied volatilities of peer emerging markets indices where
equity derivatives trade
10D EWMA
Volatility
Nigerian All
Share Index
5. Sector trends
I created this model to help rank sector volume trends
through 60-trading days and better our otherwise “snapshot
view” of sector dominance
6. Appraising Market Conditions for Mandate Execution…
These charts help describe (with average
trading positions and trading frequencies) the
challenges of execution given trading liquidity
issues per stock. The supporting model
optimises allocation based on these factors
modelled over a historic timeframe…
7. Modeling & Back-testing Trading Arbitrage Portfolio strategies…
Portfolio vs. index trading
bull & bear pay-offs
Index vs. portfolio trends
Back-tested Portfolio allocation
weights based on either
minimising VaR, downside
risk, liquidity or co-integration
Portfolio VaR and expected shortfall based on 95% Confidence level
Sample portfolio tested against sample market momentum
Active Risk Squared, information ratio and Tracking Error Volatility reported here variables, beta and unexplained factors in OLS regression
12. SURVIVORSHIP AND CREDIT LOSS ESTIMATION FOR RATED BONDS/ COUNTERPARTIES
95% CONFIDENCE LEVEL FOR LARGELY 95% CONFIDENCE LEVEL FOR LARGELY
A RATED CREDITS CCC RATED CREDITS
13. DEFAULT CORRELATIONS, RATINGS EXPECTATIONS /PROJECTIONS & CREDIT VAR
A B C
A 1.000
B 0.067 1.000
C -0.775 -0.258 1.000
Term Credit Ratings Expectations /Projections
A 7 Aa A Aa Aa Aa Aa Aa Aa
B 2 Ba Ba
C 10 Baa A Baa Aa Aa Aa Aa Aa Aa Aa Aa
Notional Expected/Projected Default Rate (S&P based)
A 45 1.60% 1.67% 0.85% 0.54% 0.36% 0.22% 0.07% 0.00%
B 175 3.43% 1.42%
C 5 7.99% 2.93% 6.25% 1.60% 1.21% 0.85% 0.54% 0.36% 0.22% 0.07% 0.00%
16. ALLOCATION OF MONEY MARKET PLACEMENTS BY COUNTERPARTY CREDIT
SCORE…RATIONALISED BY INTERNAL, EXTERNAL RATING AGENT AND PREDICTED DEFAULT
RISK FROM THE ALTMAN Z-SCORE STRUCTURAL MODEL
19. PREDICTED FUNDAMENTAL FACTORS AND CONFIRMATION THROUGH OLS REGRESSIONS
Income (% Value In (Audited Size (%
Growth In Income Earnings To Price (%
Contributed Value To Market Contributed Past Period
Class Stock (% Contributed By Contributed By
By Stock To Price (% By Stock To Returns
Stock To Total) Stock To Total)
Total) Contributed By Total)
MOBIL 9.4% 3.4%
ASHAKACEM 9.3% 3.4%
FCMB 9.2% 3.5%
UACN 9.1% 3.4%
PZ 8.9% 3.4%
NB 8.7% 3.6%
Large Capitalisation, Income
GUARANTY 8.4% 12.7% 3.5% 27.19%
UBA 8.2% 3.5%
PRESCO 8.0% 2.9%
DIAMONDBNK 7.6% 3.2%
ACCESS 7.4% 3.2%
UNILEVER 5.9% 2.9%
ETI 57.3% 10.1% 3.4% 66.43%
DNMEYER 26.0% 8.6% 2.7%
Large Capitalisation, Growth
CAP 4.0% 12.2% 3.0% 6.38%
NIG-GERMAN 0.0%
CCNN 13.7% 3.4%
FIDELITYBK 13.1% 3.5%
7UP 12.8% 3.2%
Large Capitalisation, Book
FIRSTBANK 12.5% 3.7%
Value
JBERGER 12.5% 3.3%
ECOBANK 12.4% 3.4%
GUINNESS 10.8% 3.3%
DANGSUGAR 10.8% 3.6%
OANDO 10.8% 3.5%
TOTAL 10.7% 3.4%
Large Capitalisation, Market AP 10.5% 3.3%
Related Value NESTLE 10.4% 3.5%
ZENITHBANK 10.3% 3.6%
WAPCO 9.7% 3.3%
SKYEBANK 8.0% 3.0%
Unclassifed OKOMUOIL