Related papers: Some properties of Euler capital allocation
This paper proposes analytic forms of portfolio CoVaR and CoCVaR on the normal tempered stable market model. Since CoCVaR captures the relative risk of the portfolio with respect to a benchmark return, we apply it to the relative portfolio…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
The joint Value at Risk (VaR) and expected shortfall (ES) quantile regression model of Taylor (2017) is extended via incorporating a realized measure, to drive the tail risk dynamics, as a potentially more efficient driver than daily…
Measuring risk is at the center of modern financial risk management. As the world economy is becoming more complex and standard modeling assumptions are violated, the advanced artificial intelligence solutions may provide the right tools to…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
We propose a multilevel stochastic approximation (MLSA) scheme for the computation of the value-at-risk (VaR) and expected shortfall (ES) of a financial loss, which can only be computed via simulations conditionally on the realisation of…
The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…
This paper considers the use for Value-at-Risk computations of the so-called Beta-Kotz distribution based on a general family of distributions including the classical Gaussian model. Actually, this work develops a new method for estimating…
In several real-world applications involving decision making under uncertainty, the traditional expected value objective may not be suitable, as it may be necessary to control losses in the case of a rare but extreme event. Conditional…
We create a time series model for annual returns of three asset classes: the USA Standard & Poor (S&P) stock index, the international stock index, and the USA Bank of America investment-grade corporate bond index. Using this, we made an…
We study a continuous-time portfolio optimization problem under an explicit constraint on the Deviation Conditional Value-at-Risk (DCVaR), defined as the difference between the CVaR and the expected terminal wealth. While the mean-CVaR…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
To comply with increasingly stringent international standards in risk management and regulation, several approaches have been developed in the literature for forecasting tail-risk measures such as Value-at-Risk (VaR) and Expected Shortfall…
A risk measure that is consistent with the second-order stochastic dominance and additive for sums of independent random variables can be represented as a weighted entropic risk measure (WERM). The expected utility maximization problem with…
This paper provides an insight to the time-varying dynamics of the shape of the distribution of financial return series by proposing an exponential weighted moving average model that jointly estimates volatility, skewness and kurtosis over…
We define and develop an approach for risk budgeting allocation - a risk diversification portfolio strategy - where risk is measured using a dynamic time-consistent risk measure. For this, we introduce a notion of dynamic risk contributions…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
A new semi-parametric Expected Shortfall (ES) estimation and forecasting framework is proposed. The proposed approach is based on a two-step estimation procedure. The first step involves the estimation of Value-at-Risk (VaR) at different…