Related papers: Regulator-based risk statistics for portfolios
A classical result in risk measure theory states that every coherent risk measure has a dual representation as the supremum of certain expected value over a risk envelope. We study this topic in more detail. The related issues include: 1.…
The aim of this work is to build financial crisis indicators based on spectral properties of the dynamics of market data. After choosing an optimal size for a rolling window, the historical market data in this window is seen every trading…
The key concepts (calibration, discrimination, and discordance) important in understanding and comparing risk models are best conveyed graphically. To illustrate this, models predicting death and acute kidney injury in a large cohort of PCI…
A so called Zipf analysis portofolio management technique is introduced in order to comprehend the risk and returns. Two portofoios are built each from a well known financial index. The portofolio management is based on two approaches: one…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
We discuss when and why custom multi-factor risk models are warranted and give source code for computing some risk factors. Pension/mutual funds do not require customization but standardization. However, using standardized risk models in…
We propose a numerical recipe for risk evaluation defined by a backward stochastic differential equation. Using dual representation of the risk measure, we convert the risk valuation to a stochastic control problem where the control is a…
Unlike other industries in which intellectual property is patentable, the financial industry relies on trade secrecy to protect its business processes and methods, which can obscure critical financial risk exposures from regulators and the…
The radiological characterization of contaminated elements (walls, grounds, objects) from nuclear facilities often suffers from a too small number of measurements. In order to determine risk prediction bounds on the level of contamination,…
Multivariate regular variation plays a role assessing tail risk in diverse applications such as finance, telecommunications, insurance and environmental science. The classical theory, being based on an asymptotic model, sometimes leads to…
Control of complex turbulent dynamical systems involving strong nonlinearity and high degrees of internal instability is an important topic in practice. Different from traditional methods for controlling individual trajectories, controlling…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
This paper empirically analyzes a dataset published by the European Banking Authority. Our main aim was to study how the Leverage Ratio is affected by adverse financial scenarios. This was be followed by observing how Leverage Ratio…
Measuring and managing risk has become crucial in modern decision making under stochastic uncertainty. In two-stage stochastic programming, mean risk models are essentially defined by a parametric recourse problem and a quantification of…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
We consider the two-dimensional discrete scan statistic generated by a block-factor type model obtained from i.i.d. sequence. We present an approximation for the distribution of the scan statistics and the corresponding error bounds. A…
Overrides of credit ratings are important correctives of ratings that are determined by statistical rating models. Financial institutions and banking regulators agree on this because on the one hand errors with ratings of corporates or…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…