Related papers: Tile test for back-testing risk evaluation
Model approximations are common practice when estimating structural or quasi-structural models. The paper considers the econometric properties of estimators that utilize projections to reimpose information about the exact model in the form…
This paper proposes a new metric to measure the calibration error of probabilistic binary classifiers, called test-based calibration error (TCE). TCE incorporates a novel loss function based on a statistical test to examine the extent to…
We propose the use of the probability integral transform (PIT) for model validation in point process models. The simple PIT diagnostics assess the calibration of the model and can detect inconsistencies in both the intensity and the…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
Our goal in this paper is to propose an alternative risk measure which takes into account the fluctuations of losses and possible correlations between random variables. This new notion of risk measures, that we call Copula Conditional Tail…
The multivariate conditional probability distribution models the effects of a set of variables onto the statistical properties of another set of variables. In the study of systemic risk in a financial system, the multivariate conditional…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
Credibility theory provides tools to obtain better estimates by combining individual data with sample information. We apply the Credibility theory to a Uniform distribution that is used in testing the reliability of forecasting an interest…
We construct a financial "Turing test" to determine whether human subjects can differentiate between actual vs. randomized financial returns. The experiment consists of an online video-game (http://arora.ccs.neu.edu) where players are…
We present a new procedure for conducting a sensitivity analysis in matched observational studies. For any candidate test statistic, the approach defines tilted modifications dependent upon the proposed strength of unmeasured confounding.…
We consider Wald's sequential probability ratio test for deciding whether a sequence of independent and identically distributed observations comes from a specified phase-type distribution or from an exponentially tilted alternative…
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…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
In a well-calibrated risk prediction model, the average predicted probability is close to the true event rate for any given subgroup. Such models are reliable across heterogeneous populations and satisfy strong notions of algorithmic…
Accurate forecasting of volatility and return quantiles is essential for evaluating financial tail risks such as value-at-risk and expected shortfall. This study proposes an extension of the traditional stochastic volatility model, termed…
In this paper a quantitative analysis of the ruin probability in finite time of discrete risk process with proportional reinsurance and investment of finance surplus is focused on. It is assumed that the total loss on a unit interval has a…
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
Often, it is required to estimate the probability that a quantity such as toxicity level, plutonium, temperature, rainfall, damage, wind speed, wave size, earthquake magnitude, risk, etc., exceeds an unsafe high threshold. The probability…
We propose novel methods for change-point testing for nonparametric estimators of expected shortfall and related risk measures in weakly dependent time series. We can detect general multiple structural changes in the tails of marginal…
This paper attempts to provide a decision-theoretic foundation for the measurement of economic tail risk, which is not only closely related to utility theory but also relevant to statistical model uncertainty. The main result is that the…