Related papers: Value-at-Risk substitute for non-ruin capital is f…
Recently, financial industry and regulators have enhanced the debate on the good properties of a risk measure. A fundamental issue is the evaluation of the quality of a risk estimation. On the one hand, a backtesting procedure is desirable…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
This paper considers the use for Value-at-Risk computations of the so-called Beta-Kotz distribution based on a general family of distributions including the classical Gaussian model. Actually, this work develops a new method for estimating…
Expected Shortfall (ES) in several variants has been proposed as remedy for the defi-ciencies of Value-at-Risk (VaR) which in general is not a coherent risk measure. In fact, most definitions of ES lead to the same results when applied to…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of…
The paper proposes a new approach to model risk measurement based on the Wasserstein distance between two probability measures. It formulates the theoretical motivation resulting from the interpretation of fictitious adversary of robust…
We define a new class of Bayesian point estimators, which we refer to as risk averse. Using this definition, we formulate axioms that provide natural requirements for inference, e.g. in a scientific setting, and show that for well-behaved…
Here we introduce the idea of using rational expectations, a core concept in economics and finance, as a tool to predict the optimal failure time for a wide class of weighted k-out-of-n reliability systems. We illustrate the concept by…
We analyze the potential of reinsurance for reversing the current trend of decreasing capital guarantees in life insurance products. Providing an insurer with an opportunity to shift part of the financial risk to a reinsurer, we solve the…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We show that coherent risk measures are ineffective in curbing the behaviour of investors with limited liability or excessive tail-risk seeking behaviour if the market admits statistical arbitrage opportunities which we term…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
This paper presents a systematic study of the notion of surplus invariance, which plays a natural and important role in the theory of risk measures and capital requirements. So far, this notion has been investigated in the setting of some…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
The risk of a financial position is usually summarized by a risk measure. As this risk measure has to be estimated from historical data, it is important to be able to verify and compare competing estimation procedures. In statistical…
We develop a new classification framework based on the theory of coherent risk measures and systemic risk. The proposed approach is suitable for multi-class problems when the data is noisy, scarce (relative to the dimension of the problem),…
In this paper, we argue that the prevailing approach to training and evaluating machine learning models often fails to consider their real-world application within organizational or societal contexts, where they are intended to create…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…