Related papers: Time consistency for scalar multivariate risk meas…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this…
This paper is devoted to solving a time-inconsistent risk-sensitive control problem with parameter $\e$ and its limit case ($\e\rightarrow0^+$) for countable-stated Markov decision processes (MDPs for short). Since the cost functional is…
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…
This paper gives an overview of the theory of dynamic convex risk measures for random variables in discrete time setting. We summarize robust representation results of conditional convex risk measures, and we characterize various time…
We axiomatically introduce risk-consistent conditional systemic risk measures defined on multidimensional risks. This class consists of those conditional systemic risk measures which can be decomposed into a state-wise conditional…
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…
In this paper we study time-consistent risk measures for returns that are given by a GARCH(1,1) model. We present a construction of risk measures based on their static counterparts that overcomes the lack of time-consistency. We then study…
Mean-deviation models, along with the existing theory of coherent risk measures, are well studied in the literature. In this paper, we characterize monotonic mean-deviation (risk) measures from a general mean-deviation model by applying a…
This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…
The assessment of risk based on historical data faces many challenges, in particular due to the limited amount of available data, lack of stationarity, and heavy tails. While estimation on a short-term horizon for less extreme percentiles…
Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
We study the temporal robustness of stochastic signals. This topic is of particular interest in interleaving processes such as multi-agent systems where communication and individual agents induce timing uncertainty. For a deterministic…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
Causal reversibility blends reversibility and causality for concurrent systems. It indicates that an action can be undone provided that all of its consequences have been undone already, thus making it possible to bring the system back to a…
Working in a continuous time setting, we extend to the general case of dynamic risk measures continuous from above the characterization of time consistency in terms of ``cocycle condition'' of the minimal penalty function. We prove also the…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…