Related papers: Tile test for back-testing risk evaluation

We perform a large-scale simulation of an Ising-based financial market model that includes 300 asset time series. The financial system simulated by the model shows a fat-tailed return distribution and volatility clustering and exhibits…

Probabilistic forecasts comprehensively describe the uncertainty in the unknown future outcome, making them essential for decision making and risk management. While several methods have been introduced to evaluate probabilistic forecasts,…

We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…

We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…

We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…

This paper introduces a novel two-sample test for a broad class of orthogonally equivalent positive definite symmetric matrix distributions. Our test is the first of its kind and we derive its asymptotic distribution. To estimate the test…

Split-plot or repeated measures designs are frequently used for planning experiments in the life or social sciences. Typical examples include the comparison of different treatments over time, where both factors may possess an additional…

Expectiles define the only law-invariant, coherent and elicitable risk measure apart from the expectation. The popularity of expectile-based risk measures is steadily growing and their properties have been studied for independent data, but…

By introducing a weight function into the density power divergence, we develop a new class of robust and smooth estimators for the tail index of Pareto-type distributions, offering improved efficiency in the presence of outliers. These…

Project portfolio management is an essential process for organizations aiming to optimize the value of their R&D investments. In this article, we introduce a new tool designed to support the prioritization of projects within project…

In this paper we introduce an efficient fat-tail measurement framework that is based on the conditional second moments. We construct a goodness-of-fit statistic that has a direct interpretation and can be used to assess the impact of…

Expectile, as the minimizer of an asymmetric quadratic loss function, is a coherent risk measure and is helpful to use more information about the distribution of the considered risk. In this paper, we propose a new risk measure by replacing…

As predictive algorithms grow in popularity, using the same dataset to both train and test a new model has become routine across research, policy, and industry. Sample-splitting attains valid inference on model properties by using separate…

This paper introduces a new distribution to improve tail risk modeling. Based on the classical normal distribution, we define a new distribution by a series of heat equations. Then, we use market data to verify our model.

This paper introduces a new framework to quantify distance between finite sets with uncertainty present, where probability distributions determine the locations of individual elements. Combining this with a Bayesian change point detection…

In risk management, tail risks are of crucial importance. The assessment of risks should be carried out in accordance with the regulatory authority's requirement at high quantiles. In general, the underlying distribution function is…

We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…

Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…

In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…

This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…