Related papers: Risk Premia: Asymmetric Tail Risks and Excess Retu…

We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…

The Capital Asset Pricing Model (CAPM) is one of the original models in explaining risk-return relationship in the financial market. However, when applying the CAPM into reality, it demonstrates a lot of shortcomings. While improving the…

The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…

The basic principle of any version of insurance is the paradigm that exchanging risk by sharing it in a pool is beneficial for the participants. In case of independent risks with a finite mean this is the case for risk averse decision…

In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…

The aggregation of individual risks in large credit and insurance portfolios is guided by diversification and the law of large numbers, which formalizes the convergence of sample averages to their means. At the same time, regulatory capital…

Inference over tails is usually performed by fitting an appropriate limiting distribution over observations that exceed a fixed threshold. However, the choice of such threshold is critical and can affect the inferential results. Extreme…

We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…

Given a finite collection of stochastic alternatives, we study the problem of sequentially allocating a fixed sampling budget to identify the optimal alternative with a high probability, where the optimal alternative is defined as the one…

Average forecast accuracy is not the same as forecast reliability. I treat forecast loss differentials relative to a benchmark as a return series. I then evaluate these returns using risk-adjusted performance measures from finance,…

Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…

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…

This paper proposes a new measure of tail risk spillover. The empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real economy sectors in the U.S. economy in the…

This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…

Despite decades of research in risk management, most of the literature has focused on scalar risk measures (like e.g. Value-at-Risk and Expected Shortfall). While such scalar measures provide compact and tractable summaries, they provide a…

We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…

While the {estimation} of risk is an important question in the daily business of banking and insurance, many existing plug-in estimation procedures suffer from an unnecessary bias. This often leads to the underestimation of risk and…

This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is…

We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…

In risk theory, financial asset returns often follow heavy-tailed distributions. Investors and risk managers used to compare risk measures as the value at risk or tail value at risk in order over the whole confidence levels to avoid the…