Related papers: Drawdown: From Practice to Theory and Back Again
We introduce a method to estimate simultaneously the tail and the threshold parameters of an extreme value regression model. This standard model finds its use in finance to assess the effect of market variables on extreme loss distributions…
This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…
Systemic risk measures have been shown to be predictive of financial crises and declines in real activity. Thus, forecasting them is of major importance in finance and economics. In this paper, we propose a new forecasting method for…
In this paper, we introduce the rich classes of conditional distortion (CoD) risk measures and distortion risk contribution ($\Delta$CoD) measures as measures of systemic risk and analyze their properties and representations. The classes…
In many operational settings, decision-makers must commit to actions before uncertainty resolves, but existing optimization tools rarely quantify how consistently a chosen decision remains optimal across plausible scenarios. This paper…
Regression adjustment, sometimes known as Controlled-experiment Using Pre-Experiment Data (CUPED), is an important technique in internet experimentation. It decreases the variance of effect size estimates, often cutting confidence interval…
To provide a comprehensive summary of the tail distribution, the expected shortfall is defined as the average over the tail above (or below) a certain quantile of the distribution. The expected shortfall regression captures the…
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…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
As the developed world replaces Defined Benefit (DB) pension plans with Defined Contribution (DC) plans, there is a need to develop decumulation strategies for DC plan holders. Optimal decumulation can be viewed as a problem in optimal…
Expectile bears some interesting properties in comparison to the industry wide expected shortfall in terms of assessment of tail risk. We study the relationship between expectile and expected shortfall using duality results and the link to…
Volatility is the language in which finance often describes risk, but it is not the language in which institutions experience risk. Allocators live through drawdowns, liquidity needs, spending rules, rebalance decisions, board oversight,…
Expected Shortfall (ES), also known as superquantile or Conditional Value-at-Risk, has been recognized as an important measure in risk analysis and stochastic optimization, and is also finding applications beyond these areas. In finance, it…
Multi-period measures of risk account for the path that the value of an investment portfolio takes. In the context of probabilistic risk measures, the focus has traditionally been on the magnitude of investment loss and not on the dimension…
We analyse time series of CDS spreads for a set of major US and European institutions on a pe- riod overlapping the recent financial crisis. We extend the existing methodology of {\epsilon}-drawdowns to the one of joint {\epsilon}-drawups,…
For a risk vector $V$, whose components are shared among agents by some random mechanism, we obtain asymptotic lower and upper bounds for the individual agents' exposure risk and the aggregated risk in the market. Risk is measured by…
We investigate the distributions of epsilon-drawdowns and epsilon-drawups of the most liquid futures financial contracts of the world at time scales of 30 seconds. The epsilon-drawdowns (resp. epsilon- drawups) generalise the notion of runs…
We look at optimal liability-driven portfolios in a family of fat-tailed and extremal risk measures, especially in the context of pension fund and insurance fixed cashflow liability profiles, but also those arising in derivatives books such…
Persistence diagrams (PDs) are the most common descriptors used to encode the topology of structured data appearing in challenging learning tasks; think e.g. of graphs, time series or point clouds sampled close to a manifold. Given random…