Related papers: Minimizing Shortfall
In this work we propose deep learning-based algorithms for the computation of systemic shortfall risk measures defined via multivariate utility functions. We discuss the key related theoretical aspects, with a particular focus on the…
The performance of decision policies and prediction models often deteriorates when applied to environments different from the ones seen during training. To ensure reliable operation, we analyze the stability of a system under distribution…
We examine machine learning and factor-based portfolio optimization. We find that factors based on autoencoder neural networks exhibit a weaker relationship with commonly used characteristic-sorted portfolios than popular dimensionality…
Value at Risk (VaR) and stress testing are two of the most widely used approaches in portfolio risk management to estimate potential market value losses under adverse market moves. VaR quantifies potential loss in value over a specified…
Empirical risk minimization (ERM) is typically designed to perform well on the average loss, which can result in estimators that are sensitive to outliers, generalize poorly, or treat subgroups unfairly. While many methods aim to address…
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following geometric Brownian motion as in the Black-Scholes model. Under a constant rate of consumption, we find the…
We propose a non-asymptotic convergence analysis of a two-step approach to learn a conditional value-at-risk (VaR) and a conditional expected shortfall (ES) using Rademacher bounds, in a non-parametric setup allowing for heavy-tails on the…
We consider the problems of estimation and optimization of two popular convex risk measures: utility-based shortfall risk (UBSR) and Optimized Certainty Equivalent (OCE) risk. We extend these risk measures to cover possibly unbounded random…
We find the optimal investment strategy for an individual who seeks to minimize one of four objectives: (1) the probability that his wealth reaches a specified ruin level {\it before} death, (2) the probability that his wealth reaches that…
Kuroda and Nagai \cite{KN} state that the factor process in the Risk Sensitive control Asset Management (RSCAM) is stable under the F\"ollmer-Schweizer minimal martingale measure . Fleming and Sheu \cite{FS} and more recently F\"ollmer and…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
In risk management, often the probability must be estimated that a random vector falls into an extreme failure set. In the framework of bivariate extreme value theory, we construct an estimator for such failure probabilities and analyze its…
A new realized conditional autoregressive Value-at-Risk (VaR) framework is proposed, through incorporating a measurement equation into the original quantile regression model. The framework is further extended by employing various Expected…
We find that the CAPM fails to explain the small firm effect even if its non-parametric form is used which allows time-varying risk and non-linearity in the pricing function. Furthermore, the linearity of the CAPM can be rejected, thus the…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is…
We introduce a new approach for prudent risk evaluation based on stochastic dominance, which will be called the model aggregation (MA) approach. In contrast to the classic worst-case risk (WR) approach, the MA approach produces not only a…
In the field of quantitative finance, volatility models, such as ARCH, GARCH, FIGARCH, SV, EWMA, play the key role in risk and portfolio management. Meanwhile, factor investing is more and more famous since mid of 20 century. CAPM, Fama…
This paper investigates the time-varying risk-premium relation of the Chinese stock markets within the framework of cross-sectional momentum and contrarian effects by adopting the Capital Asset Pricing Model and the French-Fama three factor…