Related papers: Pareto models for risk management
Our primary aim is to find an estimate of the expected shortfall in various situations: (1) Nonparametric situation, when the probability distribution of the incurred loss is unknown, only satisfying some general conditions. Then, following…
We have numerically simulated the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving two-body collision. Unlike in the ideal gas, we introduce…
Multivariate generalized Pareto distributions arise as the limit distributions of exceedances over multivariate thresholds of random vectors in the domain of attraction of a max-stable distribution. These distributions can be parametrized…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
Economy is demanding new models, able to understand and predict the evolution of markets. To this respect, Econophysics is offering models of markets as complex systems, such as the gas-like model, able to predict money distributions…
In risk management, tail risks are of crucial importance. The quality of a tail model, which is determined by data from an unknown distribution, depends critically on the subset of data used to model the tail. Based on a suitably weighted…
Uncertainty is prevalent in engineering design, data-driven problems, and decision making broadly. Due to inherent risk-averseness and ambiguity about assumptions, it is common to address uncertainty by formulating and solving conservative…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
According to the published papers and books since the turn of the century, Pareto optimization is the dominating assessment method for multi-objective nonlinear optimization problems treated by population-based optimizers like Evolutionary…
We introduce a new paradigm for risk sharing that generalizes earlier models based on discrete agents and extends them to allow for sharing risk within a continuum of agents. Agents are represented by points of a measure space and have…
Multivariate peaks over thresholds modeling based on generalized Pareto distributions has up to now only been used in few and mostly 2-dimensional situations. This paper contributes theoretical understanding, physically based models,…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
We study two Bayesian (Reference Intrinsic and Jeffreys prior) and two frequentist (MLE and PWM) approaches to calibrating the Pareto and related distributions. Three of these approaches are compared in a simulation study and all four to…
The possibilities of the use of the coefficient of variation over a high threshold in tail modelling are discussed. The paper also considers multiple threshold tests for a generalized Pareto distribution, together with a threshold selection…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
In risk analysis, the mean excess plot is a commonly used exploratory plotting technique for confirming iid data is consistent with a generalized Pareto assumption for the underlying distribution, since in the presence of such a…
The statistical modeling of discrete extremes has received less attention than their continuous counterparts in the Extreme Value Theory (EVT) literature. One approach to the transition from continuous to discrete extremes is the modeling…
Motivated by the modeling of liquidity risk in fund management in a dynamic setting, we propose and investigate a class of time series models with generalized Pareto marginals: the autoregressive generalized Pareto process (ARGP), a…
We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility…