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The paper analyzes the cryptocurrency ecosystem at both the aggregate and individual levels to understand the factors that impact future volatility. The study uses high-frequency panel data from 2020 to 2022 to examine the relationship…
This paper presents analytical solutions to the problem of how to calculate sensible VaR (Value-at-Risk) and ES (Expected Shortfall) contributions in the CreditRisk+ methodology. Via the ES contributions, ES itself can be exactly computed…
Exploiting near-term quantum computers and achieving practical value is a considerable and exciting challenge. Most prominent candidates as variational algorithms typically aim to find the ground state of a Hamiltonian by minimising a…
The multi-armed bandit (MAB) problem is a ubiquitous decision-making problem that exemplifies the exploration-exploitation tradeoff. Standard formulations exclude risk in decision making. Risk notably complicates the basic reward-maximising…
This paper addresses allocation methodologies for a risk measure inherited from ruin theory. Specifically, we consider a dynamic value-at-risk (VaR) measure defined as the smallest initial capital needed to ensure that the ultimate ruin…
This paper addresses the estimation of the systemic risk measure known as CoVaR, which quantifies the risk of a financial portfolio conditional on another portfolio being at risk. We identify two principal challenges: conditioning on a…
In the paper, we use and investigate copulas models to represent multivariate dependence in financial time series. We propose the algorithm of risk measure computation using copula models. Using the optimal mean-$CVaR$ portfolio we compute…
We propose a convex formulation for a trading system with the Conditional Value-at-Risk as a risk-adjusted performance measure under the notion of Direct Reinforcement Learning. Due to convexity, the proposed approach can uncover a…
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…
Systemic risk is the risk that a company- or industry-level risk could trigger a huge collapse of another or even the whole institution. Various systemic risk measures have been proposed in the literature to quantify the domino and…
In this study the cross-correlations between the cryptocurrency market represented by the two most liquid and highest-capitalized cryptocurrencies: bitcoin and ethereum, on the one side, and the instruments representing the traditional…
Against the widely held belief that diversification at banking institutions contributes to the stability of the financial system, Wagner (2010) found that diversification actually makes systemic crisis more likely. While it is true, as…
Extreme Value Theory (EVT) is one of the most commonly used approaches in finance for measuring the downside risk of investment portfolios, especially during financial crises. In this paper, we propose a novel approach based on EVT called…
Risk measures such as Expected Shortfall (ES) and Value-at-Risk (VaR) have been prominent in banking regulation and financial risk management. Motivated by practical considerations in the assessment and management of risks, including…
In this paper, we investigate the Lambda Value-at-Risk ($\Lambda$VaR) under ambiguity, where the ambiguity is represented by a family of probability measures. We establish that for increasing Lambda functions, the robust (i.e., worst-case)…
Cryptocurrency is a novel exploration of a form of currency that proposes a decentralized electronic payment scheme based on blockchain technology and cryptographic theory. While cryptocurrency has the security characteristics of being…
We show Bitcoin implied volatility on a 5 minute time horizon is modestly predictable from price, volatility momentum and alternative data including sentiment and engagement. Lagged Bitcoin index price and volatility movements contribute to…
In relation to the traditional financial markets, the cryptocurrency market is a recent invention and the trading dynamics of all its components are readily recorded and stored. This fact opens up a unique opportunity to follow the…
We study risk-sensitive planning under partial observability using the dynamic risk measure Iterated Conditional Value-at-Risk (ICVaR). A policy evaluation algorithm for ICVaR is developed with finite-time performance guarantees that do not…
Cryptocurrencies, especially Bitcoin (BTC), which comprise a new digital asset class, have drawn extraordinary worldwide attention. The characteristics of the cryptocurrency/BTC include a high level of speculation, extreme volatility and…