Related papers: Intra-Horizon Expected Shortfall and Risk Structur…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
Whenever dealing with horizons of different times scales, risk evaluation of losses may incur in both interest rate uncertainty and horizon risk as introduced in [11]. With the goal to capture both effects, we work with cash subadditive…
In this work, we focus on an infinite horizon mean-field linear-quadratic stochastic control problem with jumps. Firstly, the infinite horizon linear mean-field stochastic differential equations and backward stochastic differential…
Grasping the historical volatility of stock market indices and accurately estimating are two of the major focuses of those involved in the financial securities industry and derivative instruments pricing. This paper presents the results of…
Horizon risk (see arXiv:2301.04971) is studied in the context of cash non-additive fully-dynamic risk measures induced by BSDEs. Furthermore, we introduce a risk measure based on generalized Tsallis entropy which can dynamically evaluate…
We extend the Lindquist-Rachev (LR) option-pricing framework--which values derivatives in markets lacking a traded risk-free bond--by introducing common Levy jump dynamics across two risky assets. The resulting endogenous "shadow" short…
In a dynamic framework, we identify a new concept associated with the risk of assessing the financial exposure by a measure that is not adequate to the actual time horizon of the position. This will be called horizon risk. We clarify that…
It is well known that Expected Shortfall (also called Average Value-at-Risk) is a convex risk measure, i. e. Expected Shortfall of a convex linear combination of arbitrary risk positions is not greater than a convex linear combination with…
We study a general risk measure called the generalized shortfall risk measure, which was first introduced in Mao and Cai (2018). It is proposed under the rank-dependent expected utility framework, or equivalently induced from the cumulative…
The study of long-horizon returns has received a great deal of attention in recent years (see, for example, Boudoukh, Richardson, and Whitelaw (2008), Neuberger (2012) and Lee (2013), Fama and French (2018)). While most of the discussions…
Financial returns are known to exhibit heavy tails, volatility clustering and abrupt jumps that are poorly captured by classical diffusion models. Advances in machine learning have enabled highly flexible functional forms for conditional…
We develop a finite-horizon model in which liquid-asset returns exhibit Levy-stable scaling on a data-driven window [tau_UV, tau_IR] and aggregate into a finite-variance regime outside. The window and the tail index alpha are identified…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
This paper is concerned with a discounted optimal control problem of partially observed forward-backward stochastic systems with jumps on infinite horizon. The control domain is convex and a kind of infinite horizon observation equation is…
We consider option hedging in a model where the underlying follows an exponential L\'evy process. We derive approximations to the variance-optimal and to some suboptimal strategies as well as to their mean squared hedging errors. The…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
Accurate interception of moving objects, such as catching a ball, requires the nervous system to overcome sensory delays, noise, and environmental dynamics. One key challenge is predicting future object motion in the presence of sensory…
We provide verification theorems (at different levels of generality) for infinite horizon stochastic control problems in continuous time for semimartingales. The control framework is given as an abstract "martingale formulation", which…
Quantiles and expected shortfalls are commonly used risk measures in financial risk management. The two measurements are correlated while have distinguished features. In this project, our primary goal is to develop stable and practical…
Generating synthetic financial time series that preserve the statistical properties of real market data is essential for stress testing, risk model validation, and scenario design. Existing approaches struggle to simultaneously reproduce…