Related papers: Value-at-Risk substitute for non-ruin capital is f…
In this paper, we discuss various problems in the usage and definition of risk matrices. We give an overview of the general process of risk assessment with risk matrices and ordinal scales. Furthermore, we explain the fallacies in each…
We propose a new backtesting framework for Expected Shortfall that could be used by the regulator. Instead of looking at the estimated capital reserve and the realised cash-flow separately, one could bind them into the secured position, for…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic…
We develop a new approach to solving classification problems, which is bases on the theory of coherent measures of risk and risk sharing ideas. The proposed approach aims at designing a risk-averse classifier. The new approach allows for…
Under general multivariate regular variation conditions, the extreme Value-at-Risk of a portfolio can be expressed as an integral of a known kernel with respect to a generally unknown spectral measure supported on the unit simplex. The…
Quantification of risk positions under model uncertainty is of crucial importance from both viewpoints of external regulation and internal management. The concept of model uncertainty, sometimes also referred to as model ambiguity. Although…
Although the CML (Capital Market Line), the Intertemporal-CAPM, the CAPM/SML (Security Market Line) and the Intertemporal Arbitrage Pricing Theory (IAPT) are widely used in portfolio management, valuation and capital markets financing;…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
The new notion of maturity-independent risk measures is introduced and contrasted with the existing risk measurement concepts. It is shown, by means of two examples, one set on a finite probability space and the other in a diffusion…
We provide an axiomatic approach to general premium principles in a probability-free setting that allows for Knightian uncertainty. Every premium principle is the sum of a risk measure, as a generalization of the expected value, and a…
This thesis presents the Conditional Value-at-Risk concept and combines an analysis that covers its application as a risk measure and as a vector norm. For both areas of application the theory is revised in detail and examples are given to…
Building on Shannon's lead, let's consider a more malleable expression for tracking uncertainty, and states of "knowledge available" vs. "knowledge missing," to better practice innovation, improve risk management, and successfully measure…
This paper proposes a suite of rationality measures and associated theory for reinforcement learning agents, a property increasingly critical yet rarely explored. We define an action in deployment to be perfectly rational if it maximises…
A group of people wishes to use money to exchange goods efficiently over several time periods. However, there are disadvantages to using any of the goods as money, and in addition fiat money issued in the form of notes or coins will be…
This article is a follow-up of a short essay that appeared in Nature 455, 1181 (2008) [arXiv:0810.5306]. It has become increasingly clear that the erratic dynamics of markets is mostly endogenous and not due to the rational processing of…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
Following the rapid increase in Artificial Intelligence (AI) capabilities in recent years, the AI community has voiced concerns regarding possible safety risks. To support decision-making on the safe use and development of AI systems, there…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: richer feature spaces appear to favor complexity, while economic intuition has long favored parsimony. We show that this…