Related papers: Drawdown: From Practice to Theory and Back Again
Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure…
Control of drawdown, that is, the control of the drops in wealth over time from peaks to subsequent lows, is of great concern from a risk management perspective. With this motivation in mind, the focal point of this paper is to address the…
We introduce and study the main properties of a class of convex risk measures that refine Expected Shortfall by simultaneously controlling the expected losses associated with different portions of the tail distribution. The corresponding…
Systemic risk is the risk that a company- or industry-level risk could trigger a huge collapse of another or even the whole institution. Various systemic risk measures have been proposed in the literature to quantify the domino and…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
We consider a diffusion risk model where dividends are paid at rate $U(t) \in [0, u_0]$. We are interested in maximising the dividend payments under a drawdown constraint, that is, we penalise a drawdown size larger than a level $d > 0$. We…
We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a…
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…
While deep learning models often achieve high predictive accuracy, their predictions typically do not come with any provable guarantees on risk or reliability, which are critical for deployment in high-stakes applications. The framework of…
We discuss the coherence properties of Expected Shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the "average of the 100p % worst losses" in a sample of returns to a portfolio. Here p…
A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
Side channels represent a broad class of security vulnerabilities that have been demonstrated to exist in many applications. Because completely eliminating side channels often leads to prohibitively high overhead, there is a need for a…
Drawdowns are essential aspects of risk assessment in investment management. They offer a more natural measure of real market risks than the variance or other cumulants of daily (or some other fixed time scale) distributions of returns.…
Expected Shortfall (ES) in several variants has been proposed as remedy for the defi-ciencies of Value-at-Risk (VaR) which in general is not a coherent risk measure. In fact, most definitions of ES lead to the same results when applied to…
We present the Shortfall Deviation Risk (SDR), a risk measure that represents the expected loss that occurs with certain probability penalized by the dispersion of results that are worse than such an expectation. SDR combines Expected…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
The Expected Shortfall (ES) is one of the most important regulatory risk measures in finance, insurance, and statistics, which has recently been characterized via sets of axioms from perspectives of portfolio risk management and statistics.…