Related papers: Capital allocation and risk appetite under Solvenc…
We propose a novel time discretization for the log-normal SABR model which is a popular stochastic volatility model that is widely used in financial practice. Our time discretization is a variant of the Euler-Maruyama scheme. We study its…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…
We develop a statistical framework for risk estimation, inspired by the axiomatic theory of risk measures. Coherent risk estimators -- functionals of P\&L samples inheriting the economic properties of risk measures -- are defined and…
This article considers the problem of risk-optimal allocation of security measures when the actuators of an uncertain control system are under attack. We consider an adversary injecting false data into the actuator channels. The attack…
The standard theory of coherent risk measures fails to consider individual institutions as part of a system which might itself experience instability and spread new sources of risk to the market participants. In compliance with an approach…
This paper studies flexible multi-facility capacity expansion with risk aversion. In this setting, the decision maker can periodically expand the capacity of facilities given observations of uncertain demand. We model this situation as a…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
The main goal of this paper is an application of Bayesian inference in testing the relation between risk and return on the financial instruments. On the basis of the Intertemporal CAPM model we built a general sampling model suitable in…
In many sequential decision-making problems we may want to manage risk by minimizing some measure of variability in costs in addition to minimizing a standard criterion. Conditional value-at-risk (CVaR) is a relatively new risk measure that…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
This thesis presents the Conditional Value-at-Risk concept and combines an analysis that covers its application as a risk measure and as a vector norm. For both areas of application the theory is revised in detail and examples are given to…
Following some recent works on risk aggregation and capital allocation for mixed Erlang risks joined by Sarmanov's multivariate distribution, in this paper we present some closed-form formulas for the same topic by considering, however, a…
We propose an iterative gradient-based algorithm to efficiently solve the portfolio selection problem with multiple spectral risk constraints. Since the conditional value at risk (CVaR) is a special case of the spectral risk measure, our…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
Practitioners sometimes suggest to use a combination of Sobol sequences and orthonormal polynomials when applying an LSMC algorithm for evaluation of option prices or in the context of risk capital calculation under the Solvency II regime.…
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of…
We study a first-order primal-dual subgradient method to optimize risk-constrained risk-penalized optimization problems, where risk is modeled via the popular conditional value at risk (CVaR) measure. The algorithm processes independent and…