Related papers: Portfolio Optimization under Expected Shortfall: C…
Capital allocation is a procedure for quantifying the contribution of each source of risk to aggregated risk. The gradient allocation rule, also known as the Euler principle, is a prevalent rule of capital allocation under which the…
We propose an original two-part, duration-severity approach for backtesting Expected Shortfall (ES). While Probability Integral Transform (PIT) based ES backtests have gained popularity, they have yet to allow for separate testing of the…
The comovement phenomenon in financial markets creates decision scenarios with positively correlated asset returns. This paper addresses covariance matrix estimation under such conditions, motivated by observations of significant positive…
Although quantile regression to calculate risk measures has been widely established in the financial literature, when considering data observed at mixed--frequency, an extension is needed. In this paper, a model is suggested built on a…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
Optimal portfolio selection problems are determined by the (unknown) parameters of the data generating process. If an investor wants to realise the position suggested by the optimal portfolios, he/she needs to estimate the unknown…
A semi-parametric joint Value-at-Risk (VaR) and Expected Shortfall (ES) forecasting framework employing multiple realized measures is developed. The proposed framework extends the realized exponential GARCH model to be semi-parametrically…
Expected Shortfall (ES, also known as CVaR) is the most important coherent risk measure in finance, insurance, risk management, and engineering. Recently, Wang and Zitikis (2021) put forward four economic axioms for portfolio risk…
We study submodularity for law-invariant functionals, with particular attention to convex risk measures. Expected losses are modular, and certainty equivalents are submodular exactly when the loss function is convex. Law-invariant coherent…
This paper explores the statistical properties of forming constrained optimal portfolios within a high-dimensional set of assets. We examine portfolios with tracking error constraints, those with simultaneous tracking error and weight…
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…
This paper explores option portfolio optimization when the underlying returns are skew-elliptical t-distributed. We use the variance and value at risk (VaR) to measure portfolio risk. The novelty of our work is the departure from the…
We propose forecast encompassing tests for the Expected Shortfall (ES) jointly with the Value at Risk (VaR) based on flexible link (or combination) functions. Our setup allows testing encompassing for convex forecast combinations and for…
We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under Expected Shortfall (ES) in the case of…
This paper presents a novel approach to stochastic economic model predictive control (SEMPC) that minimizes average economic cost while satisfying an empirical expected shortfall (EES) constraint to manage risk. A new scenario-based problem…
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
Marginal expected shortfall (MES) is an important measure when assessing and quantifying the contribution of the financial institution to a systemic crisis. In this paper, we propose time-lagged marginal expected shortfall (TMES) as a…
Expected shortfall (ES), also known as conditional value-at-risk, is a widely recognized risk measure that complements value-at-risk by capturing tail-related risks more effectively. Compared with quantile regression, which has been…
The aim of this paper is to describe a new an integrated methodology for project control under uncertainty. This proposal is based on Earned Value Methodology and risk analysis and presents several refinements to previous methodologies.…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…