Related papers: Tile test for back-testing risk evaluation
To find a trade-off between profitability and prudence, financial practitioners need to choose appropriate risk measures. Two key points are: Firstly, investors' risk attitudes under uncertainty conditions should be an important reference…
The paper concerns quantile oriented sensitivity analysis. We rewrite the corresponding indices using the Conditional Tail Expectation risk measure. Then, we use this new expression to built estimators.
Tail Gini functional is a measure of tail risk variability for systemic risks, and has many applications in banking, finance and insurance. Meanwhile, there is growing attention on aymptotic independent pairs in quantitative risk…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
To apply reinforcement learning to safety-critical applications, we ought to provide safety guarantees during both policy training and deployment. In this work, we present theoretical results that place a bound on the probability of…
We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the…
Credit risk stress testing has become an important risk management device which is used both by banks internally and by regulators. Stress testing is complex because it essentially means projecting a bank's full balance sheet conditional on…
Most current assessments use ex post proxies that miss uncertainty and fail to consistently capture the rapid change in bitcoin mining. We introduce a unified, ex ante statistical model that derives expected return, downside risk, and…
The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict…
Classical measures of structural reliability, such as the probability of failure and the related reliability index, are still widely applied in practice. However, these measures are frequency-based only, and they do not give information…
We argue that spanning large numbers of degrees of freedom in empirical analysis allows better characterizations of effects and thus improves the trustworthiness of conclusions. Our ideas are illustrated in three studies: equity premium…
The aim of this paper is to propose a new methodology that allows forecasting, through Vasicek and CIR models, of future expected interest rates (for each maturity) based on rolling windows from observed financial market data. The novelty,…
We study how to perform tests on samples of pairs of observations and predictions in order to assess whether or not the predictions are prudent. Prudence requires that that the mean of the difference of the observation-prediction pairs can…
For a unified analysis on the phase estimation, we focus on the limiting distribution. It is shown that the limiting distribution can be given by the absolute square of the Fourier transform of $L^2$ function whose support belongs to…
The tail index, indicating the degree of fatness of the tail distribution, is an important component of extreme value theory since it dominates the asymptotic distribution of extreme values such as the sample maximum. In this paper, we…
As with all measurements, the measurement of examinee ability, in terms of scores that the examinee obtains in a test, is also error-ridden. The quantification of such error or uncertainty in the test score data--or rather the complementary…
The scope of this manuscript is to review some recent developments in statistics for discretely observed semimartingales which are motivated by applications for financial markets. Our journey through this area stops to take closer looks at…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
This paper proposes a new measure of tail risk spillover. The empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real economy sectors in the U.S. economy in the…
Recently, the concept of tail dependence has been discussed in financial applications related to market or credit risk. The multivariate extreme value theory is a proper tool to measure and model dependence, for example, of large loss…