Related papers: Time Varying Risk Aversion: An Application to Ener…
We propose a risk measurement approach for a risk-averse stochastic problem. We provide results that guarantee that our problem has a solution. We characterize and explore the properties of the argmin as a risk measure and the minimum as a…
This paper uses simulation-based portfolio optimization to mitigate the left tail risk of the portfolio. The contribution is twofold. (i) We propose the Markov regime-switching GARCH model with multivariate normal tempered stable innovation…
The energy market, and specifically the renewable sector carries volatility and risks, similar to the financial market. Here, we leverage on a well-established, return-risk approach, commonly used by equity portfolio-managers and apply it…
We study risk-aware linear policy approximations for the optimal operation of an energy system with stochastic wind power, storage, and limited fuel. The resulting problem is a sequential decision-making problem with rolling forecasts. In…
There are various metrics for financial risk, such as value at risk (VaR), expected shortfall, expected/unexpected loss, etc. When estimating these metrics, it was very common to assume Gaussian distribution for the asset returns, which may…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
Measuring beliefs about natural disasters is challenging. Deep out-of-the-money options allow investors to hedge at a range of strikes and time horizons, thus the 3-dimensional surface of firm-level option prices provides information on (i)…
This paper examines volatility in REITs using a multivariate GARCH based model. The Multivariate VAR-GARCH technique documents the return and volatility linkages between REIT sub-sectors and also examines the influence of other US equity…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
SVR-GARCH model tends to "backward eavesdrop" when forecasting the financial time series volatility in which case it tends to simply produce the prediction by deviating the previous volatility. Though the SVR-GARCH model has achieved good…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
We present the closed-form solution to the problem of hedging price and quantity risks for energy retailers (ER), using financial instruments based on electricity price and weather indexes. Our model considers an ER who is intermediary in a…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
Value-at-risk (VaR) and expected shortfall (ES) are two commonly utilized metrics for quantifying financial risk. In this study, we review the widely employed Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models. These…
Accurate volatility modelling is paramount for optimal risk management practices. One stylized feature of financial volatility that impacts the modelling process is long memory explored in this paper for alternative risk measures, observed…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
Estimating value-at-risk on time series data with possibly heteroscedastic dynamics is a highly challenging task. Typically, we face a small data problem in combination with a high degree of non-linearity, causing difficulties for both…