Related papers: SlideVaR: a risk measure with variable risk attitu…
Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
Tail risk protection is in the focus of the financial industry and requires solid mathematical and statistical tools, especially when a trading strategy is derived. Recent hype driven by machine learning (ML) mechanisms has raised the…
We propose a novel class of convex risk measures, based on the concept of the Fr\'echet mean, designed in order to handle uncertainty which arises from multiple information sources regarding the risk factors of interest. The proposed risk…
We consider the problem of risk diversification of $\alpha$-stable heavy tailed risks. We study the behaviour of the aggregated Value-at-Risk, with particular reference to the impact of different tail dependence structures on the limits to…
In this paper, we study general monetary risk measures (without any convexity or weak convexity). A monetary (respectively, positively homogeneous) risk measure can be characterized as the lower envelope of a family of convex (respectively,…
The rapid growth of e-commerce has made people accustomed to shopping online. Before making purchases on e-commerce websites, most consumers tend to rely on rating scores and review information to make purchase decisions. With this…
Risk-averse reinforcement learning (RARL) is critical for decision-making under uncertainty, which is especially valuable in high-stake applications. However, most existing works focus on risk measures, e.g., conditional value-at-risk…
Value-at-Risk (VaR) is an institutional measure of risk favored by financial regulators. VaR may be interpreted as a quantile of future portfolio values conditional on the information available, where the most common quantile used is 95%.…
The debate of what quantitative risk measure to choose in practice has mainly focused on the dichotomy between Value at Risk (VaR) -- a quantile -- and Expected Shortfall (ES) -- a tail expectation. Range Value at Risk (RVaR) is a natural…
This paper investigates how two important sources of risk -- market tail risk and extreme market volatility risk -- are priced into the cross-section of asset returns across various investment horizons. To identify such risks, we propose a…
Model uncertainty has been one prominent issue both in the theory of risk measures and in practice such as financial risk management and regulation. Motivated by this observation, in this paper, we take a new perspective to describe the…
This paper uses simulation-based portfolio optimization to mitigate the left tail risk of the portfolio. The contribution is twofold. (i) We propose the Markov regime-switching GARCH model with multivariate normal tempered stable innovation…
In an incomplete market, including liquidly-traded European options in an investment portfolio could potentially improve the expected terminal utility for a risk-averse investor. However, unlike the Sharpe ratio, which provides a concise…
We propose a decision-analytical approach to comparing the flexibility of decision situations from the perspective of a decision-maker who exhibits constant risk-aversion over a monetary value model. Our approach is simple yet seems to be…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
Conditional Value at Risk (CVaR) is a prominent risk measure that is being used extensively in various domains. We develop a new formula for the gradient of the CVaR in the form of a conditional expectation. Based on this formula, we…