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This paper studies a mean-risk portfolio choice problem for log-returns in a continuous-time, complete market. This is a growth-optimal problem with risk control. The risk of log-returns is measured by weighted Value-at-Risk (WVaR), which…
We introduce the notion of a risk-limiting financial auditing (RLFA): given $N$ transactions, the goal is to estimate the total misstated monetary fraction~($m^*$) to a given accuracy $\epsilon$, with confidence $1-\delta$. We do this by…
The exponentially weighted moving average (EMWA) could be labeled as a competitive volatility estimator, where its main strength relies on computation simplicity, especially in a multi-asset scenario, due to dependency only on the decay…
In this paper we introduce a novel approach to risk estimation based on nonlinear factor models - the "StressVaR" (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. Its…
The Solvency Capital Requirement (SCR) calculation is computationally intensive, relying on the market-consistent estimation of own funds. While Solvency II prioritizes the direct valuation method, it theoretically yields the same value as…
We propose a new approach, termed Realized Risk Measures (RRM), to estimate Value-at-Risk (VaR) and Expected Shortfall (ES) using high-frequency financial data. It extends the Realized Quantile (RQ) approach proposed by Dimitriadis and…
Value-at-Risk (VaR) is an institutional measure of risk favored by financial regulators. VaR may be interpreted as a quantile of future portfolio values conditional on the information available, where the most common quantile used is 95%.…
A standard quantitative method to access credit risk employs a factor model based on joint multivariate normal distribution properties. By extending a one-factor Gaussian copula model to make a more accurate default forecast, this paper…
Credit Suisse First Boston (CSFB) launched in 1997 the model CreditRisk+ which aims at calculating the loss distribution of a credit portfolio on the basis of a methodology from actuarial mathematics. Knowing the loss distribution, it is…
This work studies the dynamic risk management of the risk-neutral value of the potential credit losses on a portfolio of derivatives. Sensitivities-based hedging of such liability is sub-optimal because of bid-ask costs, pricing models…
We introduce a new approach for prudent risk evaluation based on stochastic dominance, which will be called the model aggregation (MA) approach. In contrast to the classic worst-case risk (WR) approach, the MA approach produces not only a…
We study the properties of Expected Shortfall from the point of view of financial risk management. This measure --- which emerges as a natural remedy in some cases where Value at Risk (VaR) is not able to distinguish portfolios which bear…
Determining risk contributions of unit exposures to portfolio-wide economic capital is an important task in financial risk management. Computing risk contributions involves difficulties caused by rare-event simulations. In this study, we…
The variance--covariance matrix plays a central role in the inferential theories of high-dimensional factor models in finance and economics. Popular regularization methods of directly exploiting sparsity are not directly applicable to many…
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…
Weak-value amplification (WVA) has recently become an important technique for parameter estimation, owing to its ability to enhance the signal-to-noise ratio by amplifying extremely small signals with proper postselection strategies. In…
There has been recent interest in extending the ideas of False Discovery Rates (FDR) to variable selection in regression settings. Traditionally the FDR in these settings has been defined in terms of the coefficients of the full regression…
In this paper, we propose a Network-Weighted Functional Regression (NWFR) model, an extension of Spatially Weighted Functional Regression (SWFR) to functional data defined on network-structured settings. To asses predictive uncertainity, we…
Conditional Value-at-Risk (CoVaR) quantifies systemic financial risk by measuring the loss quantile of one asset, conditional on another asset experiencing distress. We develop a Transformer-based methodology that integrates financial news…
We show how to reduce the problem of computing VaR and CVaR with Student T return distributions to evaluation of analytical functions of the moments. This allows an analysis of the risk properties of systems to be carefully attributed…